Debate on Annual Budget Statement

Order read for Resumption of Debate on Question [17 February 2012],

"That Parliament approves the financial policy of the Government for the financial year 1 April 2012 to 31 March 2013." – [Deputy Prime Minister and Minister for Finance].

Question again proposed.

Ms Tan Su Shan (Nominated Member): Mr Speaker, Sir, thank you for the opportunity to speak. Allow me to declare my pecuniary interest as a banker. I would like to begin by congratulating the Deputy Prime Minister for delivering a Budget for a more inclusive and stronger Singapore. I am also heartened that the Budget appealed to our younger Singaporeans, many of whom care about our elderly, our poor and our disadvantaged, as we all should.

That said, the Deputy Prime Minister's stated goal is a Budget for the future. A Budget for the future should address the long-term issues faced by Singaporeans. A Budget for the future should perhaps relook or adapt to a different economic model to fuel our future growth. The growth model that propelled us for the past 10 years has worked well but reached its limits. We have been successful in attracting MNCs to Singapore, in building high-end manufacturing, and a vibrant services sector, and tourism.

But these successes have led to a reliance on foreign labour and caused a significant jump in our population. And this in turn has tested the limits of our domestic resources like transport, housing and healthcare. This is not sustainable. For the next 10 years, we need to look for growth that will not add so much to our already highly-stressed domestic resource pool. The kind of growth that will not lead to spiralling inflation, a widening income gap, or an over reliance on foreign labour. This may mean that we look for growth beyond Singapore's shores. This may mean that in the long term, we need to re-sharpen or retool ourselves for a different economic growth model.

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So, today, I want to offer three key issues to focus on: (i) inflation and how the high cost of living is impacting our business competiveness and how perhaps a fresh look at our existing monetary policy could address this; (ii) the sustainability of Singapore businesses, especially at the international level; and (iii) the building of our human capital with our education system becoming more innovative to keep us all ahead.

Let us begin with inflation and monetary policy. It is obvious that Singapore is becoming an increasingly expensive city in which to live and to operate in. Last Friday, we saw our Consumer Price Index (CPI) going up 4.8% and core inflation was a three-year high of 3.5%. This reflects a serious build up of underlying cost pressures. Let us not forget that CPI represents a "change", or a delta. So when the previous figure was already high, then our costs get higher each month and each year.

In 2011, the CPI was at a high of 5.2% and that was more than five times the median of the 1.0% in the prior decade. Rising inflation hurts our businesses, especially SMEs who are already operating on low single digit margins. High inflation is passed onto consumers, and reduces our purchasing power, with our retirees one of the worst affected. With the new Budget measures pushing labour costs higher, whilst doing not much to address the key challenges of high rental and housing costs, core inflation will likely remain high this year. Is this the "new normal"? Are we asking our consumers and business community to accept that rising prices are here to stay?

Whilst the MAS has continued to maintain its strong Singapore dollar (SGD) appreciation stance, and this has helped keep imported inflation at bay, it is domestic inflation that is the greater threat. Key drivers of domestic inflation are increases in rentals, wages and COE costs. These are demand-side driven inflation pressures that may require some supply-side measures to counter them. An inclusive Budget should target and hold down domestic inflation. Having a strong SGD policy may not be enough. Perhaps at this point, we may want to think about adapting our monetary policy for a mature economy like ours, focusing on managing our nominal effective exchange rate (NEER) may not be sufficient. We may need to start to focus on other variables, including interest rates and money supply.

Two, business sustainability and internationalisation. It does appear that the Budget seeks to encourage Singapore businesses to venture offshore, be it to tap lower cost facilities and labour or new sources of revenue growth. Whilst this is to be applauded, the facts are not encouraging, especially for SMEs. The National Business Survey for 2011, conducted by the Singapore Business Federation (SBF), showed that businesses are actually looking to scale down their overseas expansion in 2012. The number of companies with an overseas presence has already dropped from 75% to 56%. The main sectors with the biggest drop are: manufacturing -23%; construction and real estate -20%; and trading -10%.

Why? Competition, manpower issues and unclear rules and regulations were cited as key reasons. The volatility of the SGD has not helped either. The SME Development Survey 2011 shows that foreign currency exchange loss is the key challenge for 43% of SMEs. And here is why – there was an 11% spike in the volatility of the SGD, with the standard deviation of the SGD/USD increasing to 0.086 over the last four years, versus 0.077 in the four years before. This spike in volatility has clearly made hedging costs for exporters very high. Furthermore, a continued appreciation of the SGD nominal effective exchange rate, means that overseas profits when repatriated back to Singapore, are worth less in SGD, again compressing margins. Hence, a Budget for the future may need to address some of these challenges faced by local companies as they venture abroad, especially SMEs.

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Three, education. Let us now talk about education and the grooming of our future talent. This is my final point, and as I had started on a good note, I too want to end on a good note. Education is a sector in which the Singapore Government has done well in the last decades. Now that we've been recognised as one of the world's best, what is next? The Chinese have a saying:长 江 后 浪 推 前 浪, 人 不 进 则 退. As we reach our goals, we need to aim higher. That does not mean better scores or grades. At this juncture, we want our children to stay relevant, to stay ahead. And I think we need to purposefully test some new models and new solutions that will better prepare our children for a more complex, inter-connected world. If we are to face a new economic growth model based on innovative thinking and collaborative action, then the old linear way of thinking is no longer sufficient.

At this point, allow me to introduce the House to the Collage Method, a non-linear method of learning that has just been piloted in Singapore. My family actually experienced the Collage model of learning first-hand as my son's school had a team of very brave, forward-thinking teachers, and my son, when he was in Primary 3, was fortunate enough to be picked as a guinea pig. As a mother, I was delighted with the Collage experience and I really hope that more can benefit from it.

So, what is Collage? It is about collaborative teaching and learning. It is about the intertwining of different disciplines, helping children to think for themselves. And it is this connectivity of ideas that make a big difference. Let me share with Members an example where the children were asked to make kites. As they made kites, they learnt Math – angles and triangles. And then they painted the designs on their kites and they learnt art. And the fun part was when they were taken to the park to fly the kites, they saw science in motion. They realised that the faster they ran, the higher the kites flew. Hence, they learnt all about kinetic energy. Then they came back to the class and learnt how to do a presentation on the history of kites 风筝的历史 in Chinese, where they picked up Powerpoint and Chinese Google. They even learnt to make a movie on the kites! And the best part? They all loved going to school and they developed a love for learning that will stay with them for the rest of their life.

So, whilst the Primary Education Review and Implementation (PERI) system has focused pretty much on the hardware of our primary school system, for our future, why not focus on the software? I hope that by sharing Collage, we can plant the seed to encourage our teachers and parents to adopt such teaching methods where students' learning styles are respected and they are taught to innovate and collaborate at a young age. Yesterday, Ms Indranee Rajah cited a great example of how public-sector productivity could have been improved if only each agency collaborated more with one another. Perhaps, the Collage style of training could be adapted for the public sector too. I can understand the resource constraints faced by the MOE but if the MOE would consider the merits of a Collage model and enable more of our students to benefit from it – even if the initial steps are modest – I am sure our young will benefit greatly.

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Sir, we are a small island, 700 square km, which we have expanded through ingenuity, hard work and vision. Thankfully, today, our reserves allow us to spread our wings and invest in far flung countries, and bring home the gains to fund our public expenditure each year. And, yet, we need to do more to ensure that this investment income is not our only source of income. To do so, we need a new model of growth, without all the negative issues that we have seen built up over the last five years. So, whilst we are a small island, we have big dreams, and as we sit on the cusps of big structural change, we need a Budget and a Government to turn these dreams into reality.

Sir, as this House debates an inclusive Budget for all Singaporeans, I hope it will also address some of the long-term challenges we face and help us focus on key issues and the key drivers of our long-term goals – for our businesses, our people and our next generation. Sir, I support the Budget.

11.19 am

Er Dr Lee Bee Wah (Nee Soon): Mr Speaker, Sir, in Malay, please.

( In Malay ): [Please refer to Pg 1714 for Vernacular Speeches.] This year's Budget shows sympathy and honesty in helping those who are less fortunate. I would like to congratulate the Deputy Prime Minister for giving special attention to the elderly, children from low-income families and the disabled. The Government's move to strengthen and widen the social safety net to take care of society's needs is very reassuring. As we face the challenge of an ageing society, we can overcome it with composure and confidence.

In order for a country to move forward, each citizen must play his or her part. If there are those who isolate themselves, it will impede development and disrupt the country's security and peace. We have seen countries, where those who are rich and in power continue to prosper, and those who are poor are unable to escape from the cycle of poverty. To continue to survive, they turn to crime and, occasionally, succumb to depression. The Deputy Prime Minister's move to continue providing room for society to help the disabled is timely and very appropriate. Each person has an aim in life, talent and uniqueness that we can tap on and channel towards the nation's development. If we do this together, we can continue to progress and succeed.

( In Mandarin ): [Please refer to Pg 1715-1716 for Vernacular Speeches.] This year's Budget is a heart-warming Budget. When the Minister for Finance was delivering his speech, the image of smiling old folks, innocent children and confident persons with disabilities came into my mind. This is part of the Prime Minister's effort to build an inclusive society for the past five years, and was not started only after last year's election.

The Government is constantly looking at various ways to ensure that older Singaporeans have a place to live and are able to work if they are healthy. The Silver Housing Bonus provides elderly Singaporeans with financial difficulties one more option. I hope HDB can allow citizens joining this scheme to enjoy priority and choose a unit near their children's home, so they can take care of each other. It will also enhance the attractiveness of the scheme.

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As for those who do not wish to move, I hope HDB will allow them to participate in the Lease Buyback Scheme, including those living in 4- or 5-room apartments, as not all old folks can adjust to a new environment. If the elderly needs to move away from their friends, sometimes it may cause great psychological stress to them. It takes time to cultivate friendship. Similarly, familiarising with the living environment also takes time. In addition, some old folks have grown attached to their homes, the environment and their friends, they prefer to stay where they are and age in place.

Another problem faced by my residents is, when they want to downgrade from a bigger flat to a smaller flat, most do so because of financial difficulties. I realised that they often face a lot of obstacles. The main problem is that they are unable to get a loan, or that the waiting time to get a new flat is too long. Can HDB render more help, for example, approve an additional concessionary loan or allocate an existing small unit for them? We should help them to downgrade to a smaller flat and not make the whole process more difficult, as this will cause them to incur more overdue interest payments and penalties.

Another group of people that need help are those who downgrade from private property to HDB flats. The existing 30-month debarment period prevents them from buying a new flat directly from HDB. I see some residents stuck in their small condominium units, which they bought when they were married. Their children have now grown up, yet they cannot move house, as renting a place in the open market for 30 months is a considerable financial burden. As a result, they are stuck. I hope the Minister can consider removing the 30-month debarment period for those private property residents who have not bought a HDB flat before.

Another group that I sympathise with is the sandwiched group. On one hand, their income does not qualify them for a rental flat; on the other hand, HDB says they do not have the ability to purchase a flat. Why can they not buy directly from HDB if they are not qualified to rent a rental unit? This is mainly because HDB applies double standards when calculating income. When the resident wants to apply for a rental flat, everything is included, including overtime pay and income from businesses; but when he wants to purchase a flat, many items are not included, for example, CPF non-payable income and overtime pay. They even want to see if your savings have been increasing every month.

These residents have no choice but to rent in the open market. However, in the past few years, rentals have been increasing, and most of their income is spent on rent. Their $2,000 monthly rental is higher than the mortgage they have to pay if they buy a flat directly from HDB. Can we make their money spent worthwhile and allow them to use money spent on rental to buy a flat? I hope these suggestions that I have just made can bring warmth and love to more residents.

( In English ): Mr Speaker, Sir, our Government has done much to help the people. It has steadily put in place over the last years schemes like Workfare, ComCare and many others. It has taken measured steps because our Government is responsible. It is mindful that there is a need for funding to support these programmes. While we face an ageing population which invariably demands more spending on such programmes, we need to strike a balance so that we do not over-burden the young working people who are paying taxes. So, we need to improve employment opportunities for Singaporeans, and the Budget has taken the right direction to call for an increase in productivity. This is the way to reduce dependence on foreign workers in the long run and, in the process, will eventually lead to a rise in the real wages of local employees.

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Yes, there will be pain in order to have long-term gain. My concerns right now are: is this cut in foreign workers too sudden? Can our SMEs cope with the pain? Or will it be so painful that they just die? Perhaps, it is also time for the Government to do R&R, ie, Review and Reflect. Why are our SMEs in this state? Are our Government policies contributing to it? We have been asking Singaporeans to look at the bigger picture. I think it is also timely for the Government to look at the bigger picture. I must declare my interest as an engineer in the construction sector, the industry that I am most familiar with. We have been building MRT projects for the last 20-30 years. Besides spending money on getting the infrastructure, did we put in deliberate efforts to also build up the capability of local expertise? How many local contractors and consultants have gained experience? And is there anyone who can go out to compete for jobs overseas? I would say there is none.

LTA has been too occupied to build the rail network at the cheapest possible cost and, in the process, they brought in a lot of foreign contractors. Our local guys felt sidelined in their own country. The Government wants them to invest in productivity tools. But does the Government assure them of sufficient jobs to recoup their investment? We keep complaining that locals are reluctant to be in construction and engineering. But look at the way HDB is calling tenders for consultancy works. I have calculated and it is not even enough to pay our engineers adequately. I am sure the intense competition will have an adverse long-term repercussion on the profession. I am not surprised if more will exit this profession.

We cannot live on passion for a profession alone. Every time we give feedback, the standard answer is, "MOF policy." In recent years, the construction sector needs more manpower and resources to cope with the demand for BTO flats. If the construction companies are incapable of achieving the required productivity in a short period of time, future BTO construction projects may experience delay or, worse, suffer from inferior workmanship. So, please do R and R – review and reflect.

Moving on to transport, I am sure there is unanimous agreement that a world-class public transport system contributes to an inclusive society. An efficient transport system ensures that everyone gets around safely and punctually, never mind if they do not have cars or taxis. As our population has ballooned by more than a million in a mere short span of a few years, it is imperative that we constantly review our public transport system to ensure that it is able to meet increased demands without sacrificing efficiency and safety.

SMRT has a fleet of 800 buses plying 74 routes, while SBS Transit has 3,000 buses which it said covers 75% of the scheduled bus service market share. This sheer numbers should rightly translate to better connectivity for residents to their destinations in good time. However, I say "rightly" because this does not seem to be the case. In Nee Soon South, residents are telling me that they are spending up to half an hour getting around the neighbourhood to the key amenities, to the MRT stations, because the waiting times for feeder bus services are too long.

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With Government spending money to give to public transport operators 550 new buses, how does the Government ensure that the public transport operators putting the buses to good use, and not to replace their older fleet or idling in the bus depot due to shortage of drivers?

I hope some of these new buses will be used to start the new route that my residents have been asking for, ie, to take them to the nearest Khatib MRT in a more direct manner and not round and round the Yishun estate and end up further north in the Yishun MRT Station, instead of Khatib Station. In Chinese, we say, 游车河.

A good transport system must also remain affordable. I am sure that if the new buses are properly deployed, waiting time for buses can be significantly reduced. But I would like to ask Deputy Prime Minister Tharman, if SMRT and SBS Transit are private companies, why is the Government setting aside public funds for the purchase of buses? The profits reaped by the operators only benefit the shareholders. In the meantime, public transport operators are increasing transport fares every few years, making very little effort to translate their profits to benefit the public. Should the public transport operators not set aside a form of sinking fund for the replenishment of buses and trains? What we are going to do is akin to providing a sort of bail out for the public transport operators. Are there any conditions stipulated by Government in exchange for these new buses? In Hokkien , we say 有来有去,that means, reciprocate. You give them the buses, they must give back in some other way.

May I suggest three conditions:

(1) Can Government get public transport operators not to increase the bus fare for the next 10 years or beyond, if possible?

(2) Can Government get public transport operators to give polytechnic students concession fares, like what JC students are enjoying? Minister Lui Tuck Yew mentioned in this House recently that it would cost $28 million a year if this is done. But bear in mind that the Government is spending $1.1 billion in this Budget for a Bus Services Enhancement Fund.

(3) Give better salary and benefits to the bus drivers.

Last Sunday, I was at a coffeeshop at Blk 848, my favourite spot, and a resident told me that her husband is a bus driver, just started not too long ago. I asked her, "How much does your husband earn?" She said, "$1,375, starting pay, and the working hours are eight to nine hours a day. Lunch time is only half an hour. If the bus were to be delayed along the journey, the half an hour lunch time can cut down to just few minutes. He has no time to go to toilet also." The Minister said that under this new plan, we hope to have a bus at every 10 minutes' interval during the two-hour peak period. This is very good. But where to find the bus drivers if we continue to give them that kind of salary and give them that kind of working conditions. In fact, my resident told me that her husband wants to quit. I told her, "Please don't quit. We need a lot more bus drivers. I will speak up for you in Parliament." Definitely, drivers deserve better benefits and better salaries.

Mr Speaker, Sir, overall, this is a compassionate Budget. Deputy Prime Minister has taken good care of our young and old Singaporeans for the future.

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If I may sum this up in Mandarin:

老吾老，以及人之老.

幼吾幼，以及人之幼.

This is the right direction towards an inclusive society. But please do R and R – review and reflect. With that, I support the Budget.

Mr R Dhinakaran (Nominated Member): Mr Speaker, Sir, please allow me to congratulate the Deputy Prime Minister Tharman for the efforts taken in the Budget to bring about a more inclusive society in Singapore and attempts to alleviate the effects of inflation.

Mr Speaker, Sir, I am here to share my thoughts and views on the Government's efforts to achieve inclusive growth. Our rapid economic growth over the years has allowed Singapore to be noticed on the world map today. While we are extremely happy and proud of this collective achievement of ours, the benefits of the growth need to percolate deeply enough to all sections of our society. Inflation in the recent years has in particular prevented a good part of our middle and lower sections of the society from fully enjoying the fruits of Singapore's growth. This section of the society has been struggling to cope with the increased costs in everyday life.

Inflation in the recent past has been very high and is caused by factors both within our system and global factors. While global factors are hard to be controlled in the difficult times we are living in, we could possibly try to keep our focus on factors within our system. Inflation has affected all factors of production within our economy almost equally. This increased cost of business is forcing prices to rise further and add to the inflationary pressures.

While Singapore has moved towards increasingly hi-tech industries, banking and financial sectors, other sectors are also needed to provide our economy with a diversified base. Today, with sufficient liquidity in the system, the capital cost and its availability has become relatively cheap and easy. But the other two factors which are scarce in Singapore, namely, land and labour, are having a significant impact in the rising cost of business.

Property in Singapore has become an important investment opportunity for Singaporeans and foreigners alike. This applies to all kinds of property, commercial and otherwise. With land being limited and more monies chasing it than ever before, the prices continue to move up faster. Structured options like Real Estate Investment Trust (REIT) allow more retail participation and the perpetual increase in property prices makes sure more monies chase REITs.

SMEs are the most affected by this increased property rentals, be it in the office space, shopping malls and industrial buildings, today have no one to look up to with even JTC slowly moving away from their original agenda of facilitating and assisting small businesses. A recent poll in October 2011 by SBF found that 64% of SMEs were affected by high labour costs, 44% affected by high rentals and 52.8% struggled with high material costs. Three quarters of them responded that "reducing business costs" is their top agenda list. On one hand, SMEs are making every effort despite the challenges to improve skills and productivity and, on the other hand, inflation is the key business costs which is eroding the hard-earned gains from the improved productivity.

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Today, there is barely any reserve price set by the Government which is not matched by a potential buyer of any site. While the prices keep going high, the investors, particularly foreign investors, continue to invest, as our economy is viewed as stable and one of the better managed economies in the world. While it is a matter of pride for us to be so appreciated by global investors, it is also a source of worry that the global wall of money should not crowd out our local needs. Increasing rentals squeeze the businesses of any gains they make either through productivity, efficiency or effective marketing of their products within the system. With limited choices available to their business, they simply pass the increased costs to their customers, fuelling further inflation.

Inflation affects the labour force faster than businesses as they have limited income in hand. The labour force expectation from the job has been increasing and they are choosy about the kind of profession they would want to join, with many preferring desk jobs to field jobs. Many businesses which require long hours of standing on the floor are forced to look beyond the local talent pool. Increasing the levy on employment of foreign workers will also result in cost increases, which ultimately will be passed on to the consumers.

Sir, yet another area which, in my opinion, is acting against our efforts to achieve inclusive growth is the rising cost for essential services like transportation, health and education. Singapore in the past has always prided herself on providing exemplary public transport facilities and clear deterrents to owning private transportation means. This allowed our planning of infrastructure and predicting the growth in traffic. Easy financing options in the recent years, including other reasons, have suddenly allowed a flood of private vehicles onto our roads which has affected the quality of transportation services. Public transport companies have also passed their increased costs to the consumers. While public transport companies may have justification as profitable companies, it is a fact that they are assisted in several ways, including exemptions on levies, duties and current budgetary funding for new buses to the tune of $1.1 billion. Therefore, it is hard to accept the profit motive at least on their transport operations.

Over a period of time the choice of using public transport, including taxi services, did not offer sufficient economic advantage to deter people from owning vehicles which are easier to finance now. Perhaps, an approach to treat import of cars for use as taxis differently than private vehicles could help in ensuring the need for owning private vehicles is kept low.

Sir, healthcare costs have gone up significantly in recent years, attributable primarily to the increased cost of running the business as often stated by healthcare operators. The shortage of local labour with expertise in this area and the nature of the business forces more import of talent which is expensive. While it is fair for us to look at having more Singaporeans in the workforce, it is my view that our aptitude and attitude towards certain type of jobs besides specific skills make it harder to recruit locally. With an ageing population, we need more healthcare workers and our Singaporean local talent is not inclined to work in these sectors. To ensure increased labour costs in such essential sectors are not passed on to the customers, we should review the additional burden of levies on foreign labour in these sectors. This will be an approach leading to a lasting solution for the continuously increasing costs.

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Having said that, it is very heartening to see that the Budget has made efforts to enhance affordability in health care through budgetary grants and increased CPF contributions, etc. This is certainly an effort to provide immediate help to the needy though the relief is more temporary in nature.

I would like to summarise my speech by saying that the Government has a very difficult balancing act to do. While we are striving sincerely to achieve an inclusive growth within our system, it is important for us to achieve this sooner than later. The Government has taken steps in the recent past to address some of these issues. However, more needs to be done and soon. Reigning in inflationary pressures from within our system will be a key to ensure that there is no decrease in social mobility. Budgetary grants at various levels will help alleviate the effects of rising costs temporarily. Inflation tends to rise faster than the help given. Therefore, we will need to look at structural changes to ensure inflationary pressures on key factors of production, like land and labour, are curtailed. It may be worthwhile to consider reviewing guidelines for companies operating to provide public services and amenities. The yardsticks for their performance may need to be pegged beyond profitability so that they are not tempted to pass on cost increases to the consumers.

Sir, we are a very small market with limited competition in the market in most sectors. Market forces may not be able to neutralise inflationary pressures as easily without structural intervention. It will be necessary to do for a more inclusive growth. In my humble opinion, while the Government through MAS has been trying to control inflationary pressures through a range of monetary policies, it must also exercise its options to take regulatory steps and nip all the causes that trigger inflation at the bud, rather than to give grants and subsidies to compensate for the increases in prices which may only provide short-term help and solution. Mr Speaker, Sir, I support the Budget.

11.50 am

Ms Ellen Lee (Sembawang): Mr Speaker, Sir, I would like to start my speech with a quote of what a true friend is: "A true friend is one who reaches for your hand and touches your heart."

Many Singaporeans have told me that Budget 2012 shows that the PAP Government is a true friend in its efforts to reach out to the less fortunate citizens, particularly low-income earners, senior citizens and the disabled. Budget 2012 puts money in the thin wallets of many needy people. More importantly, it puts warmth into their hearts. They call it, "The Budget with a heart". Many diplomats that I have met were envious and said they wished for such a budget for their own countries.

I would like to highlight the following as we come to grips with just how the Budget will affect each and every one of us. First, the emphasis on building an inclusive society. While many agree that we have to be more productive and we should rely less on a foreign workforce, many Singaporeans perceive that we are already working too hard, that it is hard to achieve a work-life balance, as a result of which it is difficult to have more children and there is a constant need to look for a less stressful job. Briefly put, there is a gap between what our head tells us and what our heart says.

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The figures given are readily understood – so many per cent each year and so much can be achieved over a decade. The issue for many people, however, remains that each day presents a huge challenge, in terms of getting my work done to the satisfaction of my boss and my colleagues, getting my children to perform as demanded by the school system, managing my aged parents who feel confined in the flat and trying to get a slightly bigger flat before the prices go sky high, and so on.

I would like to suggest that we provide more platforms to connect the budgetary measures announced to the daily concerns that our people face. It would be good if, at the workplace, group discussions could be set up so that Singaporeans can see the link between what the Government has carefully put together to achieve sustained growth and veer away from the financial crises that many countries in the developed West now face. There is a danger that beyond the superficial nod given to a poor-friendly budget, our people wake up each day feeling that not much has happened to change the things around them.

On the matter of managing our dependence on foreign workers, there is much discussion online about how it is not the lowly-paid construction worker that bothers us but the foreign talent deemed necessary to keep the corporate organisations profitable and should be less visible. As employers grapple with the impending headache of staffing costs and limited pool of available local workers, there is a need to explain, using words that are easy to understand, why the Government's foreign talent policy is vital to Singapore's future. When a thoughtless Chinese scholar's remarks could create such a furore online and even in the coffee shops, it is a sign that there is much pent-up resentment and much that is misunderstood about foreign talent in Singapore.

Mr Speaker, Sir, allow me to say the next paragraph in Mandarin.

( In Mandarin ): [Please refer to Pg 1717 for Vernacular Speeches.] Recently, a scholarship holder from China created an uproar because of his careless remarks. We see online discussions on such matters quite frequently. Let me give my own view on this issue. What kind of mindset makes Singaporeans react in such a way, even to become angry with Members of Parliament who proposed a moderate response to the incident? As I watched the media frenzy over Jeremy Lin in NBA matches, I reflected on how differently Singaporeans reacted to this American Chinese compared with Chinese viewers in Taiwan and China. There is none of the eagerness to take pride in him. This could be due to the fact that young Singaporeans have a strong sense of national identity and deep feelings towards our local culture. They are proud of anything Singaporean. Even though Jeremy Lin is Asian, he is still different, therefore there is no need to worship him. On the contrary, if it is someone with an Asian background just like most of the Singaporeans, then we cannot tolerate his ignorant and insulting remarks that hurt the feelings of Singaporeans. This feeling may cause some young Singaporeans to be very subjective and intolerant, and they protest strongly against a hurtful remark made by a non-local student.

Our National Education programme in schools should take this up so that our children can become more tolerant and be willing to accept a non-local person, as long as he is willing to contribute to Singapore and work together for the country. I think this will dispel the misunderstanding among some Singaporeans about our foreign talent policy. We need to explain in various ways the importance of foreign talents for our long-term development, so all of us will understand the issue better.

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( In English ): Another important area for my residents has to do with healthcare. Some healthcare professionals are concerned about the prohibitive costs of early intervention and treatment for special needs children. Some cared about senior citizens who could not afford medical screening costs and could not be persuaded to go for screening. Some raised the possibility of more effort devoted to developing the role of the GP in palliative care. Yet, others asked about increasing the $400 cap for Medisave withdrawal and expressed concerns about the polyclinic being ready for a large increase in patient numbers. Put simply, many of the questions deal with how the individual poor or elderly Singaporean would be able to derive the benefit that the budget is giving out to the broad categories of needy Singaporeans who are from low-income families, beyond a certain age and have certain disabilities, including challenges to mental well-being. This calls for more attention to the question of individual access. It is like the food problem that some developing countries face; when we increase the supply of something desirable, we have to consider how deserving individuals can access what is meant for them.

As Singaporeans take in more and more announcements from individual Ministries and agencies, there are two categories of feedback that captured my attention. One is related to the perception that the budget for improving the transport system would have been better spent on providing jobs or relief for the poor – and as my parliamentary colleague Er Dr Lee Bee Wah has just said, to provide subsidised travel for polytechnic students and more salaries and welfare for the SBS and SMRT bus drivers – and the other is about how singles feel left out. It seems to me that as more people voice their wish to be included as beneficiaries, there are not as many willing to speak on behalf of our children and what they think will benefit them. I read with disbelief media reports about financial ruin in some countries which have not exercised budgetary discipline and the devastating effect that it has on its citizens. One sad example was Greece, where children were reported to have been abandoned by their parents who have become too poor to feed them. There ought to be some discussion, perhaps at the community or school level, as to what our children are saying about the way other countries are spending money on their people. What can we do to make the country richer so that those who deserve to be helped can get what they need? Are our children aware that a lot is being done with their welfare close to the Government's heart?

There are indeed many questions that we can take up as Members to convey to Singaporeans that we have able leaders to chart the course ahead, but for a truly inclusive society to be built, it is all hands on deck now.

Mr Speaker, Sir, I thank the Deputy Prime Minister and Minister for Finance, Minister of State for Finance and the MOF team and all the Ministries for this heart-warming Budget that I support wholeheartedly!

12.00 pm

Mdm Foo Mee Har (West Coast): Mr Speaker, thank you for allowing me to join in the debate. I would first like to thank Deputy Prime Minister Tharman for presenting a progressive and forward-looking Budget. This Budget achieves a good balance between fulfilling the social needs of our country and addressing the longer term economic competitiveness of Singapore. I am particularly heartened by the range of schemes intended to help three important groups of Singaporeans: the elderly, the lower income and the disabled. Many Singaporeans cheer the widening of the social support net to engender a more inclusive and stronger society.

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Sir, even as we commit to an increased level of social investment, some Members of this House cautioned against promoting a culture of "entitlement", like systems in many Western countries. I am pleased to see that we continue to build our system around a culture of work ethic with initiatives that are really targeted at encouraging skills upgrading and continued employment. This year's Budget provides support to improve the employability of older workers, enhanced support for training as well as measures to increase the attractiveness of work for older workers by increasing CPF contributions and doubling their income tax relief. We must never waver in our conviction that "work is the best form of welfare".

Mr Speaker, few countries are in the enviable position of being financially strong, and many Members contrasted our position with those in the West. But our Government goes further by taking the "long view", leveraging our strong fiscal position to build solid foundations for the future. Not every similarly-endowed country is as farsighted, and I would like to quote from an email written by a friend from Hong Kong. He wrote:

"Whilst both the Hong Kong and the Singapore Governments run budget surpluses and both have accumulated substantial reserves, each takes a very different approach in leveraging its strong fiscal position. By investing in long-term productivity growth and helping the underprivileged, Singapore's approach is more sustainable and targeted. In contrast, rather than focus more on 'structural' spending, the Hong Kong government has resorted to simply handing out 'freebies' such as giving out HK$6,000 (which is close to S$1,000) to every adult resident last year, whether rich or poor. This cost the Hong Kong taxpayers the equivalent of S$5.8 billion."

Mr Speaker, Singapore's economy is at a crossroad. This year's Budget underscores the urgent need to restructure and upgrade for the future. Sir, we have set ourselves a very ambitious target of increasing productivity and real wages of Singaporeans by 30% in the coming decade. This is really aspirational, given that we managed to grow productivity by only 20% and real wages by only 11% in the previous decade.

I join many Members in this House to highlight that the journey will pose significant challenges to many Singaporean companies, especially SMEs. And should these companies fail to transition successfully, it will put at risk the livelihoods of many Singaporeans. Many employers are concerned that the foreign workers restrictions announced in this Budget are coming at a time of escalating business costs, a tight labour market and an uncertain external environment. Many businesses are wondering if they would survive the coming "squeeze", with so little room to manoeuvre.

Mr Speaker, may I recall a theme that I raised at the Opening of Parliament last year: whilst Singapore's overall jobless rate is at a 14-year low of 2%, the employment rate of older workers between the ages of 55 and 64 is only at 61%, and that of women is especially low, at 46%. Furthermore, there are still about 235,000 economically inactive women between the prime ages of 25 and 54 who may be re-inducted into the workforce. These Singaporeans may not be suited for all jobs, but I hope companies will take active steps, will think of all the possibilities to tap into this pool of talent to ease the labour shortage, thus giving older workers and women a chance to earn a living, raise living standards for their families and live more fulfilling lives.

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Sir, to succeed in our productivity journey and reduce reliance on foreign workers, employers need to re-engineer their operations by redesigning workflow and processes, as well as leveraging technology and automation. Employers need to accept that, in order to attract local workers, both their salaries and working conditions will need to be improved. Companies will also need to review their operating rhythms, job design and offer flexi and part-time work arrangements. And, of course, employers will also have to invest in the training and "onboarding" of new staff. But once successfully inducted, they can form a strong stable base of loyal employees and they can make a huge difference with their local knowledge and insights, particularly in the services sectors like retail, hospitality and tourism – who else should best deliver the "Uniquely Singapore" experience, but a local Singaporean!

As Minister Lim Swee Say said, the journey ahead will be painful, but it is a journey that must be taken. It calls for us to think differently. It calls for creativity and adaptability; it calls for determination and sustained action at every level. Our strategy is sound, but now success depends on how well we execute. With the right focus, I believe we can leapfrog from a position of vulnerability to one of strength, in workforce productivity and sector competitiveness.

Mr Speaker, in support of the restructuring efforts towards the development of a strong and vibrant SME sector, I would like to raise three areas for the Government's consideration and response:

First, to maintain flexibility, responsiveness and nimbleness in applying our policies, continuously fine-tuning at this early stage of implementation;

Second, to proactively reach out to SMEs with tailored sector-level interventions and support, and be able to replicate best practices quickly within each sector;

Third, to help companies capture new opportunities for growth internationally, leveraging on the strong €˜'Singapore'' brand to open doors and structure attractive deals.

First, instead of applying "one-size-fits-all" that cuts across companies of varying size and business nature, I believe there is room to have them calibrated more flexibly. I believe there is room for us to review our manpower policies to take into consideration a company's size, its specific sector grouping and its particular stage of growth in the development life cycle.

SMEs find that restructuring their operations is not linear. During a change process, we sometimes have to take one step back in order to take two steps forward. So, for companies that have clearly embarked on a journey to restructure for productivity, we should exercise discretion – give them "breathing space", give them what they need to ready themselves for the gains that are to come. Companies need the time it takes to establish a new process, familiarise themselves with new machines or induct and train new workers, particularly if they hire workers who have left the workplace for some time.

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Sir, whilst we are at the early stages of the restructuring journey, we would do well to be sensitive to the effects of our early efforts, to observe, learn and adapt as we help steer SMEs through this critical transformation. It is important to keep the overall targets steadfastly in sight, but just as important to maintain flexibility, responsiveness and nimbleness in applying our policies, all the while fine-tuning for continuous improvement.

Second, we need to reach out to help SMEs with tailored sector-level interventions and support. The Government has introduced a number of major initiatives to help businesses with their drive towards productivity improvement.

When researching Government schemes, I found a total of 33 different assistance schemes designed to provide companies with funding, expertise to improve processes and capabilities, and/or training support. Twenty of these schemes are generic and another 13 designed for specific industries. The productivity schemes are all currently managed and administered by different Government divisions or agencies such as Spring Singapore, IE Singapore, IDA, e2i, WDA and others.

Sir, SMEs often tell me they feel lost in this sea of complexity, they are unsure about which schemes to apply for and how to go about it. It is especially challenging for small businesses, with limited administrative resources, to navigate through this ocean of paperwork, fathom the complex network of schemes and properly execute the different application processes.

I would like to suggest to the Government to align all the productivity schemes to be company-centric, organised along the lines of the 16 priority sectors identified by the National Productivity and Continuing Education Council (NPCEC).

Companies should be able to access the different productivity improvement schemes via one single interface, whether it is for access to funding, productivity strategies, or training. And there should be only one "all-in-one" application to apply for any or a combination of these schemes. This will then avoid duplicative efforts on the part of both the Government agencies and the companies. This will also help provide a consolidated view of the holistic productivity efforts of any particular company; new schemes that are introduced later can be easily added on as supplementary applications.

Taking a sectoral approach to organise assistance schemes is consistent with the NPCEC philosophy that each sector faces different challenges and requires different solutions to improve productivity. We can reap economies of scale and offer customised assistance that target the unique needs of that sector. Companies further up the value chain can also help those that work with them, raising productivity of the sector as a whole. Trade associations and chambers (TACs) should play a key role in supporting the Government and companies to map out productivity strategies as well as serve as important platforms for migration of best practices. Sir, the way in which we organise ourselves to champion SME productivity can itself be a real lever to leapfrog and accelerate down the sector's learning curve.

Third, supporting the internationalisation of Singapore companies is a key pillar of our restructuring. This is becoming increasingly important as companies leverage off overseas markets, labour pools, land and other resources. Given the strength of our Singapore dollar, overseas market investments are becoming even more attractive. We should accelerate our efforts to build strong international Singapore enterprises, tap into the globalised supply chain and expand Singapore's market share in global markets.

Page: 1584

One area where we can do more to help SMEs is to encourage groups of local companies to collaborate as they venture overseas. We can learn from the Japanese and the Korean companies who do this particularly well. Their expansion into other countries is usually spearheaded by big corporations who will have the muscle and connections to secure large projects overseas. Then they "bring along" a whole collection of smaller companies or suppliers who will now have an anchor customer on which to sustain their overseas presence whilst building up their own funnel of business. There are many opportunities for Singapore companies to do likewise – collaboration and symbiosis are the key.

Mr Speaker, Sir, I would like to conclude by pointing out that the Government can only create an enabling environment, rich with opportunity and facility. It is up to the SMEs to seize the moment. I urge SMEs to step up, and leverage the available schemes as much and as quickly as they can to take their business to higher levels of productivity and competitiveness. SMEs are the backbone of our economy. They provide over 60% of jobs, they create value, they fulfil dreams of many Singaporean entrepreneurs. Singapore's future depends heavily on the establishment of a strong and vibrant SME sector.

In conclusion, Sir, I thank the Deputy Prime Minister and the Government for a progressive and forward-looking Budget. I support the Budget.

12.16 pm

Mr Ong Teng Koon (Sembawang): ( In Mandarin ): [Please refer to Pg 1718-1719 for Vernacular Speeches.] Mr Speaker, Sir, this year's Budget is based on the notion of building a more inclusive and stronger nation. Many targeted measures are put in place in Budget 2012 to help older Singaporeans, the disabled and the low-income earners, with the aim of narrowing the rich-poor gap in Singapore.

The Government implemented the GST Voucher – a permanent programme which would cost the Government $680 million a year comprises of three components, namely, cash payout, Medisave top-up and Usave rebates. In addition, there are also permanent incentive schemes for housing, education and healthcare. Optimistically, Singaporeans will have a better future with all these policies in place.

From the reactions of experts, academics, businessmen and common Singaporeans reported in the media, it can be said that most Singaporeans support Budget 2012. However, there is a group of Singaporeans who felt that there could be more handouts as the grants could only cover one month's expenses, older Singaporeans felt that it is more practical to give cash handouts than to raise the CPF contribution rate, while SMEs felt that reducing the foreign worker quota will affect the way they operate. No government can implement a perfect Budget. What is important is whether a government can set a Budget that best benefits most of its citizens. In my view, the Singapore Government is one such government.

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Mr Speaker, Sir, I believe the various Ministers will give more details on the housing, education and healthcare incentive schemes during the COS debate of the various Ministries, thus, today, I will focus on issues facing low-wage workers.

Lianhe Zaobao published an interview on 26 February 2012 with Mr G Muthukumarasamy, General-Secretary of the Amalgamated Union of Public Daily-rated Workers, who said most daily-rated workers are either from the cleaning industry or related industries. They are mostly aged between 40 years and over 60 years old, earning a monthly salary below $1,200. The same report also published a survey by a research company commissioned by the NTUC Unit for Contract and Casual Workers which showed that among the 400 workers interviewed, 68% were over 50 years of age and as high as 90% earned less than $1,000 a month.

In our HDB estates, every day we see older workers cleaning them in the wee hours in the morning. For workers who cleaned two 10- to 12-storey high HDB blocks, their monthly wage would be $650, for those who clean blocks with more than 12 storeys, their monthly wage would be $850.

Nominated Member of Parliament, Ms Mary Liew, also mentioned the plight of bus drivers in her Budget speech. They may be getting higher wages than cleaners but they need to worry about other vehicles on the road, the safety of passengers and having their licences revoked if they have more than 24 demerit points, and lose their source of income. The mental stress they undergo is unimaginable.

Mr Speaker, Sir, how can we help the low-income workers? I think the most practical and effective method is wage adjustment, in other words, give them higher wages. I suggest the MOM and NTUC seriously and comprehensively review the wages of low-income workers. I feel that as long as the wages are fair and reasonable, providing a sense of security for low-wage workers to go about their daily lives, they would work hard and productivity will increase. They, in turn, will motivate more Singaporeans to join these industries and reduce our dependency on foreign labour. Mr Speaker, Sir, I support the Budget.

( In English ): Mr Speaker, Sir, in English, please. Net Investment Returns Contribution (NIRC) makes up an important and significant part of our Budget revenue. I would like to draw attention and congratulate the Government and, in particular, MAS, GIC and Temasek for the outstanding job that they are doing in protecting our reserves and judiciously investing it to seek out a return to supplement our Budget.

NIRC is projected to be $7.3 billion in 2012. To put this in perspective, this projected contribution can supplement 14.5% of total expenditure, or in other words, pay for either the combined MND and MOH expenditures, or the combined MOT and MCYS expenditures. From an alternative perspective, the NIRC contributes around 90% of our GST revenue or our Personal Income Tax revenue.

The NIRC has almost quadrupled from $2.1 billion in 2006 to $7.9 billion in 2011. This is an enviable track record. Thanks to the foresight and ability of previous Governments, we are one of the very few countries who have the construct of national reserves and NIRC. This has made it possible for Singapore to keep its taxes low whilst making it possible for us to invest in economic, social and security developments.

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Mr Speaker, Sir, the point I am trying to make is that we should bear these factors in mind whenever we talk about spending from our reserves. We do not want to kill the goose that lays the golden eggs. Our reserves have to be continuously augmented and built up. This is because when Singapore faces the silver tsunami, and breaches the limits of our natural constraints, when our GDP simply cannot grow any more, these reserves are going to be the nest egg that keeps us going.

With world GDP projected to slow down this year, we have to be reasonable in our expectations in the performance of our national reserves. With the men and women in GIC and Temasek pitting their brains against the best and brightest hedge fund managers globally, they deserve more of our support in trying times as much as good times. For investment is a serious game and, in our case, even more serious because it has got a direct impact on the livelihoods and well-being of the average Singaporean.

Mr Speaker, Sir, economic restructuring and increasing productivity have been emphasised by the Minister for Finance in this year's Budget. Also, Germany's Mittelstand has been held up as an aspirational model by our manufacturing SMEs by the Prime Minister on numerous occasions in the past. Germany's Mittelstand is characterised as being family-owned, hiring local employees, specialisation in niche markets and selling to a global audience competing not on price but on quality.

Indeed, Mittelstand has been such a successful model that it has also been exhorted by the UK Chancellor as the way to revamp British manufacturing SMEs. The Economist magazine ran an article on 30 July 2011 on how German family firms are not only holding up to the Chinese manufacturing onslaught, but are outdoing their Chinese rivals.

If this Government's objective is to reduce our dependence on foreign labour, increasing productivity and innovation, then Singapore will need its own Mittelstand. What are we doing to make this possible?

We need to provide a general framework that will encourage manufacturing SMEs to move away from transactional business with a short-term focus on profit to a longer term focus on investment and reaping longer term rewards.

Our system has many of the ingredients to make this aspirational model a reality. For example, our Tripartite framework helps to maintain industrial harmony, our open markets, the latest Productivity and Innovation Credit (PIC) incentives announced in this Budget, notwithstanding efforts by MTI, EDB, Spring, IE Singapore, A-Star and the Mittelstand committee under the auspices of the Singapore German Chamber of Industry and Commerce.

However, more can be done. Firstly, the Government needs to crystallise this vision by making an unwavering and unequivocal commitment. There needs to be a clear and consistent support for key manufacturing sectors. Ensure strong connections between industry and universities. Set up research institutes to ensure high quality local talent is available. And make sure that our SMEs can leverage on the strengths and global footprint of the MNCs operating in Singapore.

Page: 1587

The Government also needs to ensure the availability of funding for SMEs. In a study done by the Confederation of British Industry and McKinsey, it was recommended that the UK Government ensure a broader range of finance for SMEs who are struggling to secure credit from banks, by way of bonds, venture capital, or investment stakes by bigger firms. The creation of a Temasek-linked EXIM bank, as announced in this Budget, will also be helpful in this regard.

In closing, increasing productivity is the only long-term sustainable way to ensure our economy grows and the wages of the median Singaporean is uplifted. Mr Speaker, Sir, I support this Budget.

12.26 pm

Mr Lim Biow Chuan (Mountbatten): Sir, I rise in support of the Government's Budget. Let me speak first on foreign workers. Sir, the Government has indicated that we need to manage our dependence on foreign workers and, in the long term, avoid having foreign workers beyond one-third of our labour force.

For the past few years, we have received many complaints that we have too many foreign workers in Singapore. Their presence has caused a squeeze on the limited available public amenities. So, Singaporeans complain that the public transport like buses, trains are overcrowded, food centres are overcrowded, public places like beaches and parks are overcrowded. It is more difficult for Singaporeans to own their first property because of the competition from a large influx of foreigners. Singaporeans also worry about the limited places in our hospitals and universities being taken up by the presence of more foreigners. Thus, it is only sensible that we should do more to encourage our companies to try to employ Singaporeans first.

However, I do urge the Government to monitor this situation carefully. Ever since the Government tightened the supply of foreign workers last year, I have received many appeals from owners of small enterprises asking for help to allow them to employ certain categories of foreign workers. These employers claim that Singaporeans are not willing to work in certain industries and, hence, they have no choice but to rely on foreign workers. For example, the employers tell me that Singaporeans generally shun from jobs in the cleaning industry and in the construction industry; they also tell me that Singaporeans do not wish to work in the nursing field or in the service line as waiters or sales staff. Thus, some employers have said that if they are not allowed to employ foreigners to supplement their workforce, their business may no longer be viable. These small companies may have to either liquidate their business or be forced to relocate. And in such cases, Singaporeans employed by such businesses may also lose their jobs.

From the feedback given, Singaporeans ask that we reduce the foreign workers in areas which our Singaporean children are being trained for. Thus, many Singaporeans ask why are they or their children facing stiff competition for middle management jobs; for IT-related jobs, for jobs in the banking or finance sector. These are jobs for which Singaporeans are trained for and they are aspiring towards. Thus, the request is for the Government to relax the criteria for certain labour intensive industries – at the construction line and the cleaning line – but we need to tighten our criteria to reduce the number of S Pass workers or other professional workers into the country.

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Sir, during the dialogues which I have held with residents, several residents had also expressed concern about the additional costs that businesses have to incur as a result of having to employ more Singaporean workers at a higher wage.

Sir, has the increase in manpower costs been factored into by the Government? Would this result in higher cost of living? Would this contribute to higher inflation for the next few years? I urge the Government to study this issue carefully to ensure that cost of living does not increase drastically for all Singaporeans even as we try to limit the impact of having too many foreign workers in Singapore.

Next, Sir, let me speak about the inclusive society. I support the effort of the Government to build an inclusive society for a stronger Singapore. The objective of most Budgets is to redistribute wealth from those who are better off to those who are not so well off. Personally, I would prefer not to have taxes collected by the Government and redistributed amongst all Singaporeans whether they need the financial subsidies or not.

There is an urgent need to plan for the future to reduce the income divide between those who are well-off and those citizens who may not have benefited from our system for whatever reasons. Thus, I am glad that that this year's Budget focused on the three groups – our senior Singaporeans, Singaporeans with disabilities and the lower income group. It clearly shows that the Government is planning for the future and has a heart for the less advantaged in our society.

Sir, I note that this year, the Government will have a small surplus of about $1.27 billion after transfer of NIRC (Net Investment Returns Contribution). The surplus last year was $2.32 billion. Would it not be better for the Government to run a balanced budget each year rather than have such a surplus? After all, we will have set aside half of the NIRC into the country's reserves. And for this year, that NIRC amount is projected at $7.33 billion.

Sir, allow me to make the following suggestions for the Government's consideration: this year's Budget proposal provides that only Singaporeans whose property annual value is below $20,000 would receive GST Vouchers. There are several retirees living in landed properties in my constituency without any income at all. The annual value of their old landed properties may be in excess of $20,000. They are asset rich but cash poor; and they are reluctant to sell their properties because they have lived in their properties all their lives until they retire; their friends living with them as well. Surely for these residents, they should also be eligible for GST Vouchers since they have no income. The proposed scheme provides that even those citizens who have an income of up to $24,000 would be eligible for the GST Vouchers. Since we do have a small Budget surplus, can we not be more generous and extend the GST Vouchers to those citizens living in properties with an annual value of perhaps not more than $30,000 but without any income at all?

Next, Sir, every year, property tax is assessed and constantly increased. That increase in property tax has been a constant bug bear amongst my residents. Property tax is a tax on assets. However, in Singapore, where the national policy is to encourage home ownership, many Singaporeans question why do they have to pay property tax on a property in which they reside in? They also face constant upwards revision in the property tax year after year. Sir, we have reviewed property tax in the 2010 Budget. May I urge the Government to consider waiving property tax for properties which are owner occupied or, alternatively, property tax can be remitted for properties with an annual value of less than $30,000 and which are owner occupied? The Government can continue to impose the wealth tax on properties which are used for investment and not for owner occupation.

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Next, Sir, even as we try to help our seniors live well and live long, I note that we have not made any provision for our pensioners who have contributed much in the growth of Singapore during our earlier nation building years. Inflation has eaten into their pension. I raised this point last year and I would like to appeal again to the Minister for Finance to consider a cost of living adjustment for these pensioners. There is also another group of people who face difficulties due to our pro-family policies. Can we consider doing more in our housing policies for the singles and the divorcees? This group of people do deserve consideration for more help to own their flats as well. I will elaborate on this point during the COS debate.

Finally, Sir, like the hon Member, Mr Hri Kumar, who spoke earlier before me, I urge the Government to consider accelerating say, a pilot programme to construct lifts at overhead bridges. Sir, I have a large number of elderly residents living in Tanjong Rhu. They struggle everyday to cross Mountbatten Road because of a high and steep overhead pedestrian bridge. For years, they have raised this complaint to me and asked for a traffic crossing along the road or for a lift to be built at the pedestrian bridge. With an ageing population, the need for a lift at the bridge is no longer a luxury but fast becoming a necessity for these residents.

Sir, if I may just touch on the Bus Services Enhancement Fund. Like many other Members before me, I wish to express concern about the $1.1 billion Bus Services Enhancement Fund which the Minister for Finance announced during the Budget. Whilst I applaud the efforts of the Government to try to improve the bus capacity and to reduce overcrowding, I am concerned about the impact on the Public Transport Operators because they have to hire more drivers and they have to incur more maintenance costs and depreciation costs on the new buses.

There have also been worries expressed that these additional buses would allow the transport operators to increase their fares. Could we have more details as to how the Bus Services Enhancement Fund work? Who owns the buses? Who would bear the depreciation costs and maintenance costs on the buses? Very importantly, would the additional buses result in higher fares this year or the next year? Would it not be better for the Government to subsidise the costs of public transport directly with this injection of $1.1 billion? I urge the Government to explain clearly what is the rationale for the Government to inject such a substantial sum of money into the listed transport companies. Are taxpayers being asked to foot the bill for dividends to be paid to the shareholders of the transport companies? This topic has been of concern to many Singaporeans and I will submit that the Government should clear the air as soon as possible.

Finally, Sir, for the past two days, almost every Member of this House who spoke had given suggestions to the Minister for Finance on how he can improve on the Budget; or asked him to give more; or asked him to consider various disadvantaged groups which may have been left out in the Budget. It is in the nature of politics for politicians to keep advocating for more improvements to make Singapore better. But I believe that we should always give credit to the Government when due. I look up the past few years' Budgets, I recall that the Government had introduced Workfare in 2007 to help supplement the income of lower-wage workers and, in that year, gave out $4 billion in GST offset packages. In 2008, the Government gave out $865 million in growth dividends to all Singaporeans and then topped up Medisave for the elderly. During the recession in 2009, the Government had introduced the Resilience Package costing $20.5 billion of which $5.1 billion went to Jobs Credit so that we can preserve jobs for all Singaporeans. And another $580 million was given out in GST Credits of which more went to the elderly and the lower income. In 2010, the Government had provided $100 million for the Workfare Income Supplement, again to help the lower income and to top up Medisave accounts for Singaporeans aged 50 and above. Last year, the Government gave $3.2 billion in the Grow and Share Package with substantial amounts again going to the elderly's Medisave and substantial amounts going to the lower income Singaporeans.

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Sir, I believe that the Government's record of helping the elderly and lower income speaks for itself. This year's Budget is an extension of the caring PAP Government that I know; a government with a caring heart for the people. Can more be done by the Government? Of course, more can be done – which is why I believe many Members in this House serve, so that we can continue working with the Government to improve the lives of Singaporeans and to improve the lives of those who are disadvantaged or under-privileged and who need more help in society. Sir, I believe that this year's Budget is especially helpful to those with disabilities because of the constant advocacy by the hon Member for Jalan Besar GRC, Ms Denise Phua. And I hope that in my term, I too could serve and make an improvement to the lives of my constituents because of my advocacy on their behalf. Sir, I support the Budget.

12.39 pm

Dr Lim Wee Kiak: Mr Speaker, Sir, over the last two and a half days, we have heard 63 speakers before me and we have heard much praise about this Budget from both sides of the House. Fundamentally, I think we are in agreement that this is a good Budget. However, looking at the new media, looking at the papers, looking at the Forum pages – some have criticised this Budget as nothing new as compared to the past while some Members in this House have described this Budget as signifying a new left shift to take care of the vulnerable members of the society.

In certain ways, I think both groups are right. I would like to borrow the famous phrase from Mr Lim Swee Say, "same-same but different". Why same-same? Same-same is because the additional assistance and support given to the elderly and given to the needy has always been a constant feature for all five preceding Budgets that were debated in this House. I think the hon Member before me, Mr Lim Biow Chuan, has stated all the figures. I shall not repeat that. The Government has always paid special attention to the elderly and to the needy in all previous Budgets handouts and redistributions. And this is true for the previous utility and conservancy rebates, Workfare Income Supplement Scheme, GST rebates, Growth Dividends, Singapore Shares, and it is the same with the GST Voucher.

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Some have spoken about this Budget as if this were the first time that this Government provides assistance to the elderly and needy, but this is not true. Some called this Budget "populist", some called this as a response to General Elections 2011, some called this as a fundamental shift. But whatever one calls it, it does not matter. What matters most is the benefit of this Budget that will bring to the people of Singapore and to Singapore.

Now, let me go through what is the "different". Although this Budget is same-same but different, there are three ways that this Budget defers greatly from previous Budgets. First, this Government that we know is extremely prudent when it comes to budgeting. The Government will not promise something that it cannot deliver. In the past, we expect a good Budget payout if the Government enjoys a windfall surplus in finances as we witnessed in 2007. The Government will share and redistribute part of the surpluses to support the needy and the elderly. Such programmes are usually once-off exercise that will not affect future budgets and they will not put a strain on the next generation. The Government usually already has the money in the Government's coffer or has plans on how to get this money before distribution. Such programmes are like the once-off GST Offset Package, the top-up of the post-secondary accounts for students, the Medisave top-ups for the elderly, Singapore shares, Growth Dividends, etc.

This time round it is slightly different. The Government announced a surplus of $2.3 billion for the financial year but pledged to set aside $3.6 billion for GST Vouchers over the next five years and also to double the healthcare spending annually from $4 billion to $8 billion per year. This is certainly a significant departure from previous Budget. While I welcome the change, I am also concerned with whether the increase in social spending is sustainable or will it erode away our financial prudence that we painstakingly built up over the years. Is this increased recurrent spending sustainable? Will this lead to higher direct or indirect taxes that Singaporeans need to pay in the near future?

I think many Members of this House have given more suggestions and are asking for more. The question I would pose is: where do the resources come from? The GST Vouchers will require $0.6 billion per year and the Workfare Income Supplement Scheme costs the Government about $0.5 billion per year. The Government will be making transfers of $1.1 billion annually. While the WIS is funded by the proposed GST increase when it was announced, how is the GST Vouchers funded in the long term? The current fiscal surplus was possible because of a strong property market and good corporate earnings for the last financial year. But will this last year after year? We cannot expect a repeat as we are experiencing a slowdown in the property market with cooling-off measures implemented by the Government and also corporate earnings may be hit, may be below expectations with the unstable global financial markets and rising oil prices due to potential Middle East conflicts.

This has led to some Members, including the hon Ms Denise Phua and NMP Laurence Lien in this House, calling for higher taxation for those in the higher income group and also to re-prioritise our current Government spending, especially on defence. If you look at the Government's revenue, the total amount that is brought in mainly by personal income tax comes out to about $6 billion to $7 billion per year. The corporate tax doubles that to about $12 billion. The Net Investment Income contributes about $8 billion whereas the GST – about $8 billion. Rising income tax on high wage earners itself will have a small impact actually on the overall because it is the lowest of the four high figures there. Raising income tax on high wage earners may risk an exodus of these high wage earners who are very mobile and will be readily accepted by many other countries.

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Reviewing defence budget with a view to re-channel resources to social needs will weaken our national defence with undesirable consequences. We just celebrated Total Defence Day last month. There is no need for me to reiterate what the undesirable consequences might be.

I would like to suggest an alternative: that we relook at the Net Investment Income that is earned from our national reserves. Currently, the Government is already tapping half of the Net Investment Income which contributes about $7 billion to $8 billion annually for our Government's expenditure. If we need to, can we increase by another 10%, which is about $700 million annually, to fund the additional amount needed for the GST Vouchers? Our national reserves represent the hard work and the accumulation of wealth contributed by our fathers and grandfathers and all those before us. Today, many of them are in their golden years. There is no need for us to continue to increase our national reserves at such a rapid pace. Is there one? After all, all land sales proceeds still go to the national reserves, and with about 40% of Net Investment Income going back to national reserves, the reserves will not be depleted but will still be increasing, but just at a slower pace.

We have set aside endowment funds in Medifund, ComCare fund, Edusave fund – there is a whole list to go through – to fund recurrent expenditure needed, so that we need not tax the next generation to fund these social and developmental programmes. Why can we not use similar models now to fund our increase in social spending? Is it because the amount needed now is too large? Can we start small and build up along the way as we have done so for the rest of the endowment funds?

The second point I would like to make is that this is a more "silver" Budget than in the past. While the Government has always supported the elderly in the past with various programmes and schemes introduced, all programmes, including GST Offset Package, Singapore Shares, Growth Dividends, were tilt towards the favour of the elderly and to provide better support for this generation. It is the right thing to do. It does reflect our Singapore societal values. However, previous Budgets would have significant focus on growing the economic pie so that we can continue to have resources to support our social programmes. Previous Budgets would also have focus on investing in the young for the future and also investing in R&D, so we can continue to innovate and stay ahead of the regional economic race. Previous Budgets also had economic focus to strengthen our position as a transport hub and as a financial and business centre. Although the Deputy Prime Minister has emphasised that our growth strategy is largely intact, focusing on rising productivity and the efforts that we started a few years ago, the focus is obviously not as prominent as in previous years.

I applaud the Government€˜s bold moves to support our elderly through employment credits for seniors, raising the CPF contribution rate, silver housing bonus, GST Vouchers and increase in healthcare expenditure. These are long-term social programmes. May I ask what is the projected increase in expenditure in the next five, 10, 20 years, as we approach 2030 when one in five Singaporeans are above 65 years old?

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Filial piety is one of the most important Asian values and supporting our elderly in our families remains critical in this respect. What is the long-term strategy of the Government for our silver generation? What is their role in taking care of the elderly? When the state takes on more responsibilities to take care of the elderly, will that erode the responsibility of the family? How is the Government maintaining this balance? Should more incentives be introduced to encourage families to take care of the elderly at home in our society? While building more elderly homes is needed, will more homes lead to young families dumping their elderly to these institutions? Can the Government do more to support families taking care of the elderly at home?

The last point I would like to touch on is the green focus. I have spoken on this year after year for the last five years. I am hoping more for this Budget to encourage all of us to adopt a green mindset. I am glad that the green vehicle rebate has been rectified to be based on carbon emission. The previous green car rebate did not take into account carbon emission at all. In fact, many of the large cc green cars, including some SUVs which actually emit much more carbon than normal non-green cars, are given a green rebate because they are fitted with a small hybrid engine and a small battery. However, the $20,000 rebate on the Additional Registration Fee (ARF) seems pale in comparison with the green car rebate, and I wonder whether it will actually make a difference to the green car population in Singapore. We had mooted in this House a green car COE, but the problem was in the definition of "what is a green car". I hope the Government can still consider this suggestion but now change it to a low carbon emission COE – we can still call it a green COE – as a sure way of obtaining buy-in from the population. I doubt the current carbon emission-based rebate would significantly increase our green vehicles on our roads, and I suspect we still have a long road ahead to see a greater proportion of green vehicles on the road.

There are also no new incentives to support green industries although the Government has earlier identified that a possible growth sector for Singapore is to develop green industry. Green buildings are reported in the media occasionally, and we are building an eco city in Tianjin. What have we done to promote more green buildings in our own city? Can more be done to ensure our buildings comply to green codes so we can be more efficient with our energy needs? Since the price of solar panels have dropped significantly in recent years, can we do more to encourage buildings, both public and private, to install solar panels on their roofs and open spaces? We should encourage energy generated to be channelled and sold back to the grid during the day so as to reduce our reliance on non-renewable energy sources. Can the Government incentivise Town Councils, private property owners, to install more solar panels on the roofs of covered walkways, roofs of carparks, roofs of HDB flats and other properties, systematically to increase the use of solar energy over time? The Budget did not cater for a greener Singapore. What is our long-term strategy towards a greener Singapore?

Next, I would like to echo the concerns of many Members on the reduction of foreign labour force. I do, however, disagree with the Non-Constituency Member of Parliament, Mrs Lina Chiam, in her analogy that cheap foreign labour force is like performance-enhancing drugs. I have spoken on this topic for the last three years during Budget, and I think describing cheap foreign labour as an addictive narcotic drug is more appropriate. Addictive narcotic drugs will give instant gratification and numb all pain for the users. Over time, the drug will weaken the user and, ultimately, leading to destruction, while performance-enhancing drug will artificially boost the performance but may not have long-term detrimental effects on the user, and they are usually not addictive. Performance-enhancing drugs can be withdrawn without any withdrawal symptoms. If we stopped all foreign labour tomorrow, many businesses will suffer immediate withdrawal symptoms; some may even have cardiac arrests instantly.

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The best way to treat drug addict is still cold turkey treatment but with proper support. But I am glad that the Government is not doing that, bearing in mind that the Government has basically suggested a reduction in the dependency ratio, not completely abolishing it until zero. There must be proper support given to treat drug addicts. Likewise, the Government's approach of enhanced Productivity and Innovation Credit and enhanced training support is similar to the support given. However, just like treating drug addicts, the therapy must be a closely supervised one, as many addicts will not follow through the therapy or treatment voluntarily on their own. We have witnessed that in our drug addicts, and we have witnessed that in our businesses and SMEs as well.

I would like to repeat my request in last year's speech for a more individualised and more supervised approach to each company or business that is addicted and has grown too dependent on cheap foreign labour. Many do not have the insight of how they can be weaned off. If they give up, many good jobs for Singaporeans would be lost in the process. I hope the Government can provide more proactive consultancy service on increasing productivity to companies in need.

Lastly, I would like to raise the issue of retirement adequacy. I am very concerned that the main items that Singaporeans rely on are their CPF savings and their HDB flat. These are their two most valuable assets when they retire. The CPF was originally intended as a saving scheme to meet our basic needs in our old age, as we did away with the pension scheme. Along the way, there were more and more requests to use the CPF for other purposes such as housing, education, healthcare and investments. The CPF is a limited pool of resources, especially for the lower income group. For this group, there is hardly any amount left after deducting the CPF for housing. CPF LIFE and annuity plan were started to ensure a constant and steady supply of a stream of income for our retirement. However, for most, it is insufficient to depend on the monthly payout alone. The HDB flat remains as the most valuable asset many Singaporeans have when they retire. One way of supplementing their income is to allow HDB flat owners to unlock the value of their flats, and owners can do this in three ways: one, rent out the rooms or even the whole flat if they have an alternative place to reside in; two, the Government's Lease Buyback Scheme as enhanced by this Budget; three, they can sell and right-size their flat with the Silver Bonus given by the Government as well. So, the elderly who own the flat can have various options to monetise their flat asset. There is really no preferred option as it is really up to the elderly now to decide what is best for them, depending on their individual preference and the family support that they have. Hence, in my opinion, there is really no need for the Government to provide an annual report on actually how many have opted for each option, as suggested by a Member in the House.

All these options are only possible if HDB flat prices remain stable. What happens if HDB flat prices drop, as many Members have hoped for in this House? The elderly homeowners will be left with a less valuable asset. With the current ramping up of supply of HDB flats to meet the increasing demand, I fear that we may see another round of HDB flat oversupply situation as we had witnessed more than a decade ago. Currently, there are nearly one million flats for 3.2 million Singaporeans and 0.6 million Permanent Residents. That is almost equal to one flat for every 3.8 residents, assuming all of them staying in HDB flats. The current building pace will certainly outpace the demand and swing the pendulum to the other extreme if we are not careful. With the tightening and slowing down of the foreign labour force, the demand of housing will also ease somehow. This is likely to affect the rental market and will affect property prices indirectly. With the triple whammy of increased supply of both HDB and private properties, reduced demand from the reduction or stagnation of foreign labour force in Singapore and the property-tightening measures implemented by the Government recently, the most likely effect is a further depression of HDB property prices. How will that affect our elderly HDB homeowners?

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Lastly, I am also concerned with the sustainability of old HDB flats. HDB flats, after all, are 99-year leasehold properties. Almost one-third of the flats are more than 30 years old now, which means only two-thirds of the lease are remaining. In another two decades, they will be 50 years old with less than half of their lease remaining. Can they still command the prices today? Will banks or HDB still give loans to buyers of such properties with less than 49 years of lease left? What happens to these flat owners? I do not think it is realistic to expect the Government of the day to en bloc all these flats or to expect buyers of these flats to fork out what they are willing to pay today. I do not have any suggestions on this issue, but I hope the Government will address this early and prepare the owners of these flats for the eventuality.

Many Singaporeans do not plan and do not have the means to plan for their retirement adequacy. With our ageing population and shifting demographics and reduced dependency ratio, we cannot rely on the next generation to fund our retirement. The provisions we have today are clearly insufficient. I urge the Government to do a comprehensive review on Singaporeans' retirement adequacy.

Sir, in conclusion, this is a Budget with a heart. It is a Budget that is not equal in distribution, and that is not the intent. It is a Budget that gives most to those who need support rather that give all to placate. There will always be people who are not happy that they are receiving less compared to previous Budgets. We all have to recognise that our resource is limited.

As I watched the last video clip shown by the Deputy Prime Minister, like our hon NCMP Mr Gerald Giam, I was also moved to tears but it was for a different reason. The difference is mine was tears of optimism and joy, rather than pessimism and fear.

Mr Speaker: Dr Lim, please wrap up your speech.

Dr Lim Wee Kiak: I am also touched that the little girl is aspiring to do well so she can buy a house for her parents when she grows up. To me, that is the Singapore dream. Many of us, including myself, were in that narrative too when we were young. Many Singaporeans, including many Members of this House lived the Singapore dream and succeeded. I am sure Members from both sides of the House will agree that we must do everything we can to keep the Singapore dream alive and strong. To me, that is what this Budget is about. With that, I support the Budget.

12.59 pm

Mr Edwin Tong Chun Fai (Moulmein-Kallang): Sir, thank you for the opportunity to join in this debate. Sir, the array of steps and measures introduced in this Budget bears the hallmark of a Government that foresees the challenges ahead of tomorrow and one which is alive to the key concerns of its people and their aspirations of today and dreams of tomorrow. It is a Budget which takes care of the less advantaged and those who cannot do so well for themselves but, at the same time, promotes opportunities to the fullest for Singaporeans to develop new skills and deepen existing ones, and realise their full potential. At the same time, it seeks to address one of the most pressing concerns of the average Singaporean, which is that of the rising cost of living.

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Sir, I support the initiatives and programmes in the Budget. These had been extensively and, may I say, eloquently debated in this House over the last two-and-a-half days, and I would just like to make three observations.

Sir, the first point is in embracing change. As the Deputy Prime Minister noted in his speech, when he introduced the Budget, the initiatives to restructure our economy in this Budget are not new. They were introduced at least two years ago and, if you look back, you will see that the seeds to encourage a productive and innovative economy had been planted then.

In 2009, we were deep in the throes of a serious global financial crisis. Many of us remember the economic gloom at that time. It affected many Singaporeans and the future looked uncertain and distinctly uncomfortable. But the Government responded quickly and decisively. It introduced measures in the Budget at that stage to pull Singapore away from the serious crisis, with programmes to save jobs, create new ones, provide assistance to those affected. We have Special Risk-Sharing Initiative (SPUR), we have Jobs Credit Scheme, and these were just some of the programmes which were added to Workfare at that time, and may I say, to great effect.

Subsequently, our economy rebounded faster and stronger than expected. We posted a record growth of 14.5% in 2010. This was achieved in no small measure because of the forward thinking in both Budget and Government policies which were introduced at the time when the global economy remained in serious depression.

In some ways, the extraordinary growth in 2010 has, however, masked some of the challenges which we have in our economy. A growth of about 5% last year is good, but it is fair to say that 2012 opened with much less positive sentiment in the economy than at the start of last year. We need only look around at the US economy, or anywhere in Europe to know that this year will be a challenging one. Some challenges are new; some are old. We have a declining birth rate, an ageing population, a growing income inequality and an increasing strain on some of our infrastructural resources like transport and healthcare.

Budget 2012 must therefore be seen in the light of the prevailing conditions, both in Singapore and externally, against which this Budget is to be applied. In my view, this is a Budget that reflects Singapore's philosophy, perhaps even a need, to always remain ahead of the curve. We have to embrace change and harness it, before change overtakes us. In the face of a tight labour market and rising costs, we must find a way to reinvent and reinvigorate our workforce. As Minister Lim Swee Say put it so well yesterday, we have to suffer some short-term pains in adjusting and restructuring, in order to reap longer term rewards of a more productive and innovative workforce.

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One of the initiatives underpinning this change is a deliberate move away from over reliance on foreign workers. A lot has been said in this House about this and I cannot add much to the debate. I only want to say that I support the initiative, and I welcome the fact that the Budget does not expect our businesses to trade foreign workers for increased productivity and innovation overnight, and a period of adjustment is indeed catered for. I hope that in this adjustment period, the Ministry of Manpower will look more closely at the deserving appeals which will no doubt be made for the entry of foreign workers for some small and medium businesses.

But in the longer and even in the immediate short term, the foreign worker policy can only be good for our lower-wage workers. In this respect, I heard the Member for Aljunied, Mr Chen Show Mao, make a case yesterday for lowering the bar for the entry of foreign workers in the low wage sectors, particularly. The upshot of his proposal is that our Singaporean low-wage workers will have increased competition for jobs at that level, and this will ultimately depress the wages for the already low-wage workers. These were the very same arguments canvassed very strongly by the Workers' Party not too long ago and, I believe, from what I heard yesterday, ran directly counter to what the hon Member, Mr Chen, had pressed for in Parliament yesterday.

Sir, my second observation. One very visible and marked emphasis in this Budget is the deliberate stepping up of social policies to provide greater economic security for a range of less advantaged in our society. In addition, this Budget introduced, I believe for the first time, a permanent transfer scheme by way of the GST Vouchers. This is distributed to Singaporeans by way of U-save credits, Medisave top-ups and straight cash.

As the Deputy Prime Minister has acknowledged, the income inequality in Singapore has widened over time, and it will be here to stay. Singapore, like any newly developing global city, sees a significant income gap, and the trend in the last 10 years shows that the income gap will likely grow larger. If you look back at the last 10 years, the Gini Co-efficient has grown steadily from 2000 to 2010. It is true that many other countries, including advanced Asian economies like Japan and South Korea, have also experienced rising Gini Co-efficients in the same period. But, as I understand it, their rate of growth is not as quick as that of Singapore's.

Hence, the social policies that we see and transfers aimed directly at helping the low income will be a feature that will be here to stay. Indeed, the GST Vouchers will be a long-term feature of our fiscal policy and not just a temporary offset measure. This, Sir, signifies the Government's assessment that the income gap will not be significantly bridged anytime soon, and, by extension, we are also likely see progressively enhanced social policies to assist the lower-income Singaporeans.

Sir, these enhanced social policies, part of making this Budget an inclusive one, received widespread cheers when the Deputy Prime Minister announced them, and I support them. I particularly support the measures which address the disabled and the elderly because it is those two groups who will likely find employment very challenging and difficult.

However, my first thoughts when I heard these measures were that we should be careful that we do not go too far with these measures and end up on the slippery slope to being a welfare state. Welfarism has long been said to be the anti-thesis of competitive culture. In Singapore, we maintain our competitive meritocracy and we have steered clear of the welfare mentality. Our public assistance and other similar schemes are very rigorously means tested, and granted only for a limited period of time to discourage welfare dependency.

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Sir, I am not suggesting that this Budget creates an attitude of welfarism. I believe public spending in Singapore on social programmes still lags behind the pace of economic development in Singapore and still remains the smallest amongst our competing, developed economies, and for good reason. Our economic competitors − such as Hong Kong, South Korea and Taiwan − they have a much larger social programme and they have also not lost their competitive edge.

But I do think we should be careful as we revise and add to the social policies in later years, particularly where it involves permanent transfers. The GST Voucher will now be a permanent feature in future fiscal policies. We have heard the hon. Member Dr Lim Wee Kiak said that this will cost the Government $3.6 billion over the next five years. This is a policy which will grow to become an entitlement for Singapore and Singaporeans will depend on it. In contrast to temporary offset packages, it will be more difficult to remove or re-calibrate such permanent transfers.

Sir, we should always strive to balance the free-market operation of the economy with concern for the less advantaged, but never at the expense of undermining the competitive meritocratic ethic which has underpinned Singapore's growth and economy.

Sir, my last observation is that on investments we made in education. The Budget recognises that central to the uplifting of low-income families is the enhancement of education opportunities for our children – all of our children. I agree entirely with that. I am heartened to see that the Budget allocation to the Ministry of Education is amongst the highest. This comprises pre-school subsidies, which now operate on a per capita basis, MOE Financial Assistance Scheme, where the income ceiling has been raised from S$1,500 to S$2,500 per month and, finally, a $200 million top-up to the Edusave Endowment Fund.

At the opening of Parliament in October last year, President Tony Tan, in his Address to the House, noted that heavy investments have been made and continue to be made in education for the young, and that we should maximise their pathways, give them options, help them gain confidence and blossom. Sir, to me, this is absolutely vital and there is no doubt in my mind that the future of Singapore lies in our children, and a good all round education gives our children from the lower income families the best opportunity to break out of the lower income mould, and to do well for themselves in life.

The Government has been continually upgrading our education system at the primary, secondary and tertiary levels. There have been progressive changes which the MOE has made to our education system over the years. The most recent ones have been most exciting. The focus has shifted to quality and diversity, with the goal being to develop the potential of every child to maximum, such that we attain many and different peaks of excellence, particularly in terms of character development and the inculcation of a good value system in our children. In addition, more choices are being introduced for students so that they can develop their strengths and interests in sports, in arts, in culture, in intellectual endeavours as well as to enhance the varied pathways offered to our students.

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But, Sir, it is not only about how much the Government spends or hands out, or what subsidies there are, or what bursaries there are, or what financial assistance can be obtained. Singaporeans must themselves endeavour to play up to their strengths and seek out their own pathways.

The Deputy Prime Minister cited the example of Mohd Fairoz, a student from Yusof Ishak Secondary School. It was a very heart-warming story. He comes from a lower-income family. He has obtained a variety of Edusave bursaries and scholarships, and he has done very well. More importantly, he has the opportunity to now go on to do well in what he enjoys, which is stage acting.

Singaporeans must be prepared to embrace diversity, seek their own paths of success and take the opportunities which present themselves, which this Budget strives to achieve. Too many Singaporeans grumble about the workload in school, or the competition with foreign students or spend all their free time at tuition centres. I believe, with the investments we have made in our education system and the emphasis which MOE has given, we now have a system of pathways which can shoulder the nurturing of different talents and allow our students to pursue different dreams at different times. I urge Singaporeans to be broad minded in pursuing that dream. Be like Mohd Fairoz or be not, and choose your own path.

Sir, I will just sum up with one observation. Again, the Deputy Prime Minister's closing remarks to the Budget Statement resonated strongly with me. He said, and if I may quote: "Opportunity, improving ourselves, compassion. They define the character of our society we are building, and must be our common purpose as Singaporeans." This statement does not just define the goals of this Budget and what it seeks to deliver to Singaporeans. It is a statement which sets our national agenda. It is a statement which tells us what the Government sees as its vision of Singapore and what we want to achieve. I agree entirely with it. It also reminds all of us, as elected representatives of Singaporeans, that our collective mission, indeed, is to improve the lives of all Singaporeans. Sir, with that, I support the Budget.

1.12 pm

The Deputy Prime Minister and Minister for Finance (Mr Tharman Shanmugaratnam): Mr Speaker, Sir, I would like to thank all Members for their views, very vocal views I would say, over the course of this two-and-a-half-day debate. There have been many useful comments, both on the broad themes of the Budget, and also many specific comments – some to do with housing, MCYS schemes, MTI issues and others. Many of these specifics will be taken up during the Committee of Supply (COS).

I would like to concentrate in my response today on the broad themes that have come up in the course of the debate:

First, how we can support our SMEs in transforming themselves over the next decade; and

Second, how we should tackle the challenge of inequality.

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I will also address the questions that many Members have raised regarding the Government's expenditure of $1.1 billion over the next 10 years to expand public bus capacity.

Let me start with the challenge of transforming our SMEs. Many Members, such as Ms Jessica Tan, Mr Teo Siong Seng, Mr Inderjit Singh and others, have spoken with great concern about this topic.

We have to be concerned about our SMEs. Do they have a future? What role will they play in our economy? Will they be a vibrant part of it or will they suffer and find it difficult to survive, year after year? The SME sector is a key concern for our economic policies. They are also important from the social point of view because they are mainly owned by Singaporeans and hire a majority of Singaporean workers. Therefore, keeping that part of our economy alive and thriving is also a way in which we preserve an inclusive society.

1.15 pm

The operating environment for SMEs, as Minister Lim Swee Say said yesterday, is tough. We must never neglect our SMEs as we go forward. The principal reason why the operating environment is tough is that costs are going up. The reasons, as Mr R Dhinakaran mentioned a short while ago, are:

First, labour is more expensive, because wages have gone up significantly for Singaporeans. Basically, the labour market is tight and will remain that way. This is however a good thing for Singaporean workers, and we do not want this to change. Second, rentals are increasing. This is principally because of our natural constraints as a city-state, and the fact our business community is on the whole doing well. Demand for office, industrial and commercial space has gone up faster than supply because we have many more businesses being formed, and growing. These are the two major cost drivers: a tight labour market with rising wages and a strong demand for space (industrial, commercial, office) which is driving up rentals. Rentals also follow a cycle, and hopefully this year, rental growth will level off. We are already seeing signs of moderation in average rentals. MTI will be addressing the issue of rental costs more fully in its COS.

But the fundamental constraints will remain. We are not a low-cost business location, and will not be in future. So, we have to help our companies, and especially our smaller companies adapt to the reality of Singapore being a relatively high cost business location.

Where we can, we will try to mitigate or slow down the pace of cost increases. With regard to the cost of commercial and industrial space, we are increasing what we are putting out to meet demand in the Government land sales programmes. In fact, quite significantly over the medium term. If Members look at the potential supply of new shop space, there are 90,000 square metres of new shop space coming on stream each year over the next five years. For industrial land too – extra land is coming on stream. In fact, 24 hectares of industrial land is being made available in the first half of this year.

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These are the things we will do over the course of the property rental cycle, but the fundamental constraints remain unchanged. This is not a low-cost business location; it is a relatively high-cost business location and therefore it needs relatively high productivity, relatively high skills, and the entrepreneurial abilities to put it together and to not just survive, but thrive.

This is what the Government is focused on – helping our SMEs raise productivity and invest in better jobs, and that way also enable our people to have higher wages. It means training in skills, it means better use of technology, developing new products and better branding, and it means finding new markets abroad, including niche markets for specialised products and services. In each of these areas, the Government pledges its support for our SMEs.

Let me now address, more specifically, the concerns over foreign worker policy measures – how fast we should tighten, and if we should tighten at all. This occupied a good part of the debate on the challenges that SMEs are facing.

We just had another interesting term to describe our reliance on foreign workers – from Dr Lim Wee Kiak – "addictive narcotic drugs". Earlier on we had "performance enhancement drugs" from Mrs Lina Chiam, "crutches and braces" by Dr Chia Shi-Lu, "intoxicants" by Dr Amy Khor, and "two rear wheels of a bicycle" by Mr Patrick Tay.

Many descriptions, but let me first make clear that foreign workers are and will remain integral to our economy and to our competitiveness. They are a valuable complement to the Singaporean core that we must keep building up in every segment of our workforce. They are arms and legs, and part of the brain, of a competitive global city. Foreign employees are a valuable complement to our Singaporean core.

Our strategy of allowing foreign workers at all levels of our workforce – those with low skills and in areas where you do not normally find Singaporeans; those with technical skills; and those with the higher skills, the talented or entrepreneurial individuals who bring specialised skills, networks and opportunities for Singapore – this strategy has by and large worked. It has gone hand in hand with the rise in incomes of Singaporeans, both lower income Singaporeans as well as our middle income Singaporeans. You have seen the data.

As Member Dr Lim Wee Kiak just pointed out, and Minister Lim Swee Say emphasised yesterday, we are not "turning off the tap for foreign manpower". There is no "cold-turkey treatment" for our companies. This is not a sudden change in policy. It is a graduated and calibrated strategy.

We made our intentions very clear two years ago after the Economic Strategies Committee's Committee Report, when we started tightening. We introduced a three-year programme of increasing foreign worker levies. Last year, we accentuated the increases, because foreign worker growth had been rapid in an unusually strong economic recovery. This year, we are taking a further step, with a calibrated reduction in dependency ratio ceilings, again because the growth of foreign workers continues to be rapid – and much more rapid than the growth of local workforce.

It will not be our last move. We have to watch how rapidly the foreign workforce grows this year. And if need be, we will have to make further moves particularly in the foreign worker (FW) levies in the years to come. We will watch this carefully over this next year, and calibrate our moves so that businesses can adjust. We will also accompany any further levy increases with support for businesses to help them upgrade.

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Members had differing views on the pace of FW tightening. Some Members, such as Mr Zainal Sapari, Mr Yeo Guat Kwang, Dr Chia Shi-Lu and a few others, were squarely in favour of the pace we have adopted in tightening policies. Some others were concerned and understandably, such as Mr Teo Siong Seng, Mr Inderjit Singh and Er Dr Lee Bee Wah. They were concerned about whether SMEs would be able to cope and whether we are moving a bit too fast.

Mr Low Thia Khiang and Mr Chen Show Mao, I think, now recognise that we have to maintain a very careful balance in how we go about our foreign worker policy. I think you have shifted your position because I have checked what was said previously during the 2010 and 2011 Budget and COS debates and also your Workers' Party manifesto in last year's General Election when you criticised the Government for allowing in too many foreign workers. I think your position now accords with ours, and recognises that this is a very careful balance. First, because we have to ensure that our companies can stay competitive, and that Singaporeans thereby keep their jobs and their incomes continue to grow. Second, we have to be extremely concerned about the SMEs, which you have all rightly emphasised. If we withdraw the foreign workers too quickly, this will curb our SMEs and they will not be able to cope with the pace of change. But if we are too slow in tightening on foreign worker policies, the incentive to upgrade will also lessen. And we will face, as Minister Lim Swee Say said, even bigger and longer term problems further down the road. So, it is a very careful balance we have to maintain.

The Government does not think we can slow the pace that we have adopted in our foreign worker policies – the pace of adjustment of the foreign worker levies, and the moderate reduction in Dependency Ratio Ceilings (DRCs). As I mentioned earlier, we may have to go further in future years on the levies. For the latest DRC measures, we are giving companies a two-year transition period for them to adjust to the new DRC for existing workers, as we recognise that businesses have already invested and trained these workers.

For the larger companies, this is a challenge most can respond to – investing in creating better jobs, equipment, looking for new markets, improving their branding. Many smaller companies will be affected, but, in fact, the number of workers involved in most of these cases is small. For most small companies affected by the new DRCs, they will only need to find a substitute for one or two foreign workers – either finding a Singaporean to take the job, or raising productivity.

There are some useful suggestions on some of the flexibilities we should consider in the use of foreign workers, so that businesses can optimise the use of their foreign workers within the dependency ratio ceiling limits.

Mr Ang Wei Neng and Ms Tin Pei Ling suggested allowing companies to keep experienced foreign workers who have been trained for longer periods, as long as the company is still within its DRC. There is merit to this proposal. Retaining well-trained and experienced foreign workers is a plus for productivity, and it spares the company from having to re-hire and re-train another foreign worker. MOM is reviewing its policy to see how we can achieve this objective for Work Permit Holders (WPH), particularly for workers who are unable to pass the stringent skills tests but have gained experience on the job and are useful people in the firm.

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A second area of flexibility that has been raised is in the deployment of foreign workers across job duties within the same firm. We have been very strict about the occupational roles. In our dialogues with industry, business chambers and associations, there have been requests to allow more flexibility for this. For example, in hotels, housekeeping staff may be needed to help out in F&B when there is a slack period in house-keeping. And in the small restaurants, they sometimes want kitchen staff who are not being used to be re-deployed as waiters or vice-versa . In small restaurants, this can be a meaningful boost to efficiency. MOM will look into allowing this. We will start with relaxing the occupational restrictions in the hotel sector. We will be working closely with our tripartite partners to set the criteria and conditions to make sure the productivity improvements also flow through into benefits for our local workers.

These are two useful suggestions we have received and we will look into them.

Next, the broader issue of how our foreign worker policy is implemented. In particular, we have had some suggestions from Members as to whether we can give more flexibility to specific industries that seem to have greater need for foreign workers. In reality, we already have different levels and DRCs for the five broad sectors of manufacturing, services, constructions, marine and the process industry.

Mr Low Thia Khiang and Mr Chen Show Mao have suggested that this framework is too blunt and can be refined, and that we should instead work out foreign worker allocations at a greater level of disaggregation, to meet the industry-specific needs, and based on consultations with the industries.

Mr Chen Show Mao had a specific suggestion that high-end industries like aerospace should be given more stringent limits, and industries like construction can be given more liberal limits.

Some other Members had suggestions for the cleaning industry, F&B, retail, healthcare and social services – all of which, it was felt, had special cases for why they should be treated differently and given more foreign workers.

Let me say that this approach has some appeal when you first look at it, and especially if you talk to the businesses. It is a very persuasive case because they are, indeed, short of workers. But it will not in fact work – and this is a practical issue, not a philosophical issue.

First, it will not achieve our objective of controlling the overall number of foreign workers and, in particular, preventing excessive growth in the overall number of foreign workers.

Second, it will not achieve our objective of boosting productivity and incomes.

Third, it is not only impractical in practice, but it can be inequitable. And that part is a philosophical point, I will admit. It is also an inequitable scheme – it gives unfair advantage to some firms over others.

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Let me explain this in some detail, as this is an important issue on how we implement our foreign worker strategy. The reality of the matter is that the most rapid growth of foreign workers has been in the same sectors that we are now asked to make exceptions for. These are the construction industry and services industries like F&B and retail. Services and Construction account for 90% of the total increase in foreign workers that we have seen in the last five years. Within Services, it is basically the industries that the Members have identified that are the ones that have seen the most rapid growth. So, if we want to be more liberal on them, whether it is in DRCs or levies, either we have to be extraordinarily stringent on the other sectors where foreign worker demand has not been going up, or we accept more rapid foreign worker growth overall. And the likely and realistic outcome is we will have more rapid foreign worker growth overall. That is the upshot.

Second, if we are going to do something along the lines of what Mr Chen Show Mao suggested, where the more productive and higher skill industries are given more stringent limits, while the less productive ones like construction are given more liberal limits, over time, what that amounts to is that we provide more help to the low-productivity sectors relative to the high-productivity sectors. And that is the opposite of the restructuring we want to encourage in our economy, because that will hamper overall productivity growth. Overall, the economy weakens and slows down.

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So, what we want to do in every sector is help the more efficient players, whether it is construction or F&B. If you have low productivity, raise it. If you already have high productivity, raise it even further. And that is our approach. That is why we have a levy system. The levy system is the basic approach we have in place to ration foreign labour. We do not control the actual numbers that come in but we control the price. It is a level playing field, every firm in every industry knows what the levy is. Within the same industry, if I am competing with another firm and if I am less efficient, I will have to pay more, because I need more foreign workers. If I have to pay more, there is an incentive for me to upgrade. And for an industry that is inefficient as a whole, the same incentives apply. So, there are incentives for everyone to upgrade. It would not be a sensible strategy to discourage upgrading, weaken productivity growth and seed further growth of our foreign workforce.

The same sectors that are in greatest need of foreign workers are also the sectors where our productivity lags furthest behind international leaders, such as Construction, F&B, retail. In F&B, we are three-quarters the level of productivity of Hong Kong and 40% the level of New York. In retail, we are two-thirds the level of Hong Kong and 45% the level of New York in terms of productivity. Construction, we are one-third the level of Japan and half the level of the US.

These very same industries which understandably cry out for more foreign workers are in fact those with the greatest scope to upgrade productivity, and to attract Singaporeans into better quality jobs.

The third reason why it will not be the right approach to go "industry by industry" or "firm by firm" is because of its complexity, and because it would therefore also not make for an equitable system. There is a great overlap between industries. Even in the current system with broad sectoral distinctions – between manufacturing and services, we already face issues of an unlevel playing field. If I am a large F&B operator with a central kitchen, my central kitchen is classified as Manufacturing and has an advantage over a smaller company that is not able to have a central kitchen and is hence classified as Services, which is subject to a more stringent Dependency Ratio Ceiling. Likewise, in a manufacturing company, in-house logistics is part of Manufacturing, whereas an independent logistics provider is treated as Services, with more stringent foreign worker limits.

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So, even with the broad classifications that we are making in our current framework, we already have problems at each of the boundaries, and consequently the lack of a level playing field. These inequities will be greatly accentuated if we get down to "industry-by-industry" distinctions. Take the aerospace industry, which Mr Chen Show Mao cited. What is aerospace?

The aerospace industry comprises many different types of companies operating in a broad cluster. It may sound high-end and high-skill, but actually a significant part of aerospace is airframe maintenance and overhaul which is highly labour-intensive. At the other end of the spectrum, the components part of the business is not so labour-intensive.

Within the aerospace industry, there are some large firms that perform both high-skill and low-skill, labour-intensive businesses, and others that specialise in one particular segment. It will be quite inequitable if a large firm that undertakes both the high-end and low-end segments is entitled to a higher foreign worker quota on grounds that it is doing low-end work, while a small firm that is competing with it at the high-end is forced to operate within the more stringent foreign worker quota.

These are impracticalities and inequities that arise when we try to choose how many foreign workers each specific industry or firm should obtain based on merit or consultations. Who is more deserving than the other?

In fact, Mr Low Thia Khiang made a good point. We should avoid the situation where small firms are disadvantaged compared to large firms, or where a firm that is able to get foreign labour has an advantage and can succeed, while those that cannot are disadvantaged. That is precisely why we should not go about choosing and deciding that you should get more foreign labour and you should get less. It would be highly inequitable and will disadvantage our small firms in practice.

It is an interesting suggestion, but you may not have realised fully what its consequences will be. The consequences are quite predictable. It would mean more growth of our foreign workforce, lower productivity growth and a lot of inequity on the ground, as well as scope for abuse.

We have to maintain a careful balance, and this applies also to the issue of Employment Pass holders. Mr Patrick Tay and Mr Low Thia Khiang raised concerns about Employment Pass holders. This is an issue we are concerned about as well.

First, let me say that Employment Pass holders are an important part of our economy, very important part of the diversity of our workforce. The growth in Employment Pass holders in our workforce has gone hand-in-hand with the growth of local PME employment, as well as local PME wages. The fact that both wages and employment went up for local PMEs indicates that it was demand that was the driver, because both wages and the number of jobs went up. So, there has been an increase in demand for local PMEs.

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Likewise, at the lower end of skills − Singaporeans who perform ordinary jobs in our firms have also benefited from the presence of Employment Pass holders. If you go down and look at any individual company, you will see the complementarities. Without that team of people comprising both Singaporeans and foreigners working in the technical and professional jobs, it would be hard for the company to stay competitive and to generate the jobs lower down in the skills ladder.

So, we have to be careful about how we tilt this balance as we go forward. We are tightening on Employment Pass eligibility rules, because we want to build up our Singaporean core in each sector. But we are tightening in a graduated fashion.

One of the reasons why we have to be concerned is our SMEs. Our SMEs are an important source of demand for Employment Pass holders and S-Pass holders, both of which Mr Low Thia Khiang mentioned. Mr Low spoke about what happened in the last two years.

In fact, in the last two years, one-third of the increase in Employment Pass and S-Pass holders were hired by small firms, those with less than 50 workers. If we tighten too quickly, these small firms will be hurt the most. So, let us be careful about how we go about this.

I am glad Mr Low now shares the same objective. We now have the same sense of needing to maintain a careful balance and go about this in a graduated fashion. We will not spare any efforts in helping our SMEs upgrade and improve productivity. I do not need to go through the schemes that have been announced in the Budget, but I do want to address Ms Jessica Tan's point that some of our brochures about PIC are excessively long. No one will need to read 66 pages, which include all the annexes. We will make it as simple as possible for SMEs. We will go out of our way to reach out to them, hold their hands, work with the business associations, enterprise development centres and CDCs. We will proactively look for SMEs and help them to take advantage of our schemes, instead of waiting for them to come forward. We will talk more about this during the MOF's Committee of Supply.

Mr Inderjit Singh asked if we will be overtaxing our SMEs, if we add up all the taxes that they pay. Now, our tax rates in Singapore are extremely low. Our tax rates for SMEs are lower than most jurisdictions. A small enterprise with a turnover of less than $10 million pays on average corporate income tax of 8%. In Hong Kong, the same size company would pay about 16.5%, and in Taiwan about 17%. The other developed countries typically have higher tax rates.

There is then the foreign worker levy, which is a form of tax. But as I emphasised in the Budget, we are giving back much more to companies through our tax deduction and grant schemes, much more than the increase in foreign worker levies. And this applies especially to SMEs.

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Not everyone will get the same support. We have adopted a strategy that deliberately favours those that are doing something to train their workers, invest in equipment, and make better use of technology - anything to raise productivity. The gains are substantial, even for companies that do not have taxable profits – they can get a very generous cash co-payment. For every $100,000 of expenditure on productivity, the Government will pay $60,000.

But the company must do something, the company must invest in something, and then it gets aggressive support. That is our basic approach, and I think we have at least a fair chance of success. As Mr Lim Swee Say had emphasised yesterday, we cannot say for sure that we are going to succeed. But I think we have at least a fair chance of success, of ensuring that amongst our SMEs today and the new SMEs to come, that we will have a vibrant pool of Singapore firms 10 years from now, and with a significant international reach.

Let me now move on to the second broad theme of the debate, which is about tackling inequality.

Virtually everyone spoke on this topic. I am glad that most Members supported the thrust of the Budget and the direction the Government is taking, not just for this year, but in the years to come.

Many spoke about giving more help to the lower income groups, such as Ms Amy Khor, Ms Lily Neo and NMP Mary Liew.

Others, such as Mr Patrick Tay, Mr Zaqy Mohamed, NMP Eugene Tan and Mr Sitoh Yi-Pin, spoke specifically about the middle-income group or the sandwiched class, especially those who feel the squeeze of costs, with young children and elderly parents.

Mr Gan Thiam Poh, Mr David Ong, Mr Zainudin Nordin, Ms Mary Liew and Dr Lim Wee Kiak also spoke about retirement adequacy. That, too, is a very important issue, which will be addressed in the Ministry of Manpower's Committee of Supply debate.

Let me start by reiterating our basic approach in tackling the challenge of inequality.

First, we must grow our economy on a sustainable basis and, in particular, grow it by raising productivity so that we can raise incomes across all income levels. Our economic strategies are thus closely bound with our social strategies - how we create an inclusive society depends also on how we grow our economy. This first strategy, of growing incomes of all Singaporeans, is extremely important.

Second, we have to do everything we can to preserve social mobility, starting from a young age. Several Members spoke about various initiatives – Dr Intan Azura gave the example of Mendaki's Max-out programme. Mr Faisal Manap spoke about social workers, and I am glad he agreed with what was said in the Budget Speech about the need to reward social workers appropriately and give them fulfilling careers. Ms Low Yen Ling spoke about specific schemes to attract therapists and Learning Support Coordinators to work with children at the pre-school level. There are many programmes. We have to work harder in each of these areas and do everything we can to preserve and enhance social mobility.

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Our third strategy is redistribution. Quite apart from growing incomes and doing what we can do to preserve social mobility, we have to redistribute resources through a fair system of taxes and benefits.

This has been a feature of all our previous Budgets, and is very much present in this year's Budget. We will provide significant benefits to the lower income group to help them keep up and upgrade. But we also want to avoid placing an excessive tax burden on the middle income group. That is our third strategy.

Our fourth strategy, equally important, is to partner the community. This is not about the Government alone. It is about building up our VWO partners and supporting community volunteers in every field, so that we can support the disabled, poor and elderly. None of this is about just the CDC or the Government, but also about community organisations and volunteers who are there with us. So, those are our four prongs to tackle inequality and we are going to do more and do better in each of these four prongs.

Now, let me address some of the main issues in turn.

First, the issues concerning the lower-income group. Let me say that inclusive growth is not a new focus in the Budget, as Assoc Prof Muhammad Faishal Ibrahim had pointed out, and Mr Lim Biow Chuan just a short while ago had emphasised.

We made major moves in the last five years, major interventions – Comcare; Workfare in 2007; enhancing housing subsidies very substantially. I would like to assure Mr Gerald Giam, who might not have caught up with all the developments, that our enhanced housing grants are such that a family with a monthly income of as low as $1,000 can now purchase a small flat. 98% of our younger cohorts, those who are below 35, earn at least $1,000 of income a month. A family that earns a bit more, say $1,400, can purchase a medium-sized flat.

So, if the Member is concerned about younger people being unable to afford a flat, try and catch up on what we have been doing. The housing grants that we have been giving are more aggressive than what any other government would give. For those who really cannot afford it, we have other schemes to help them. Home ownership is a very important plank of how we are helping our low-income group, and helping them to accumulate savings over time. So, that was a major intervention in the last five years.

We also expanded education subsidies significantly in recent years – especially at the tertiary levels – and healthcare subsidies.

As a result, in the last five years, the transfers we provided to the low-income group – net of the taxes that they paid, which is basically GST – amounted to almost 20% of their incomes. This is a significant increase from the previous five years. We have made major moves through a range of interventions, to address the issue of inequality and help build an inclusive society. So, this is not something that came about only post-GE 2011. _(Refer toAnnex A on Pg 1696 ) _

Now, another way of expressing what we are doing, and taking into account what this year's Budget contains, is to think of this over a lifetime. What do taxes mean, and what do transfers and benefits mean, over a lifetime for a low-income household?

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If you add it all up together, you will find that for every dollar that the low-income household pays in taxes, they get back more than $4 in benefits. A whole set of benefits add up to this – which includes Workfare, housing grants, and means-tested healthcare and education subsidies. _(Refer toAnnex B on Pg 1697 ) _

This is a simple expression of how progressive our system is. Everyone pays some taxes, because everyone should contribute to a better Singapore. But the low-income group gets back much more in targeted benefits, which support work, education, and housing. They get back four times the amount that they pay in taxes.

But this is also a reminder of a different point, raised by Mr Ang Hin Kee, Mr Edwin Tong and Dr Amy Khor, which is that we also need to be careful how much further we go. As Mr Ang Hin Kee and others mentioned, we have to be concerned about what too high a level of benefits will mean. It is not that people try to game the system deliberately. It is only natural human behaviour to want to stay where we are, and not upgrade, if it means losing benefits if we upgrade. Every society has found this to be a problem. As we expand benefits, more people try to stay within the group that receives the benefits, instead of upgrading beyond that threshold.

So, we must be quite careful. To preserve that drive to do better, to learn a new skill, and to help the whole family move up. Because that drive at every level of Singapore society is what defines us. It is not just the drive among the most talented or the most well-educated, but the drive among ordinary, working Singaporeans, that has defined us. Let us not lose that.

This means being focused in our interventions as we go ahead. We will do much more to build an inclusive society. But let us not try to do more across the board, and more and more every year.

What we will be focusing on, first, is social mobility – we are going to do more, particularly at the early stage, similar to what many Members have spoken about.

Second, we must do more to help the lowest wage workers, including cleaners, the lower end of security guards, and a few other occupations. Wages have been stagnant in these occupations. They need more help, and we must intervene on a tripartite basis to help them.

There are many reasons why wages are so low. The composition of some of these occupations is part of the reason. About three quarters of our cleaners in offices have very low education – primary level or lower – and most are older Singaporeans. While that does not justify such low wages, it is part of how the market works. We do need to do more to help them, and make sure they get a proper wage – enough to live on, and enough for their families to get by.

We will do more, together with our tripartite partners. For the cleaners in particular, MOM is working with NEA; in the case of security guards, with the Ministry of Home Affairs. We will look into improving professionalism, employment standards, and wages. We will be providing more details on this later.

Third, we will do more for those with disabilities. Many Members have spoken on this. Ms Denise Phua and Ms Jessica Tan had a specific suggestion about extending the Special Employment Credit (SEC) to people with disabilities who had not gone through our SPED schools. This is a useful suggestion. MCYS will be addressing this in the COS.

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There were also suggestions during the debate about extending the SEC to other groups – home-makers who re-enter the workforce, ex-offenders, single mothers. I would be very careful about extending this to more and more groups, as the SEC is a major intervention in the job market.

And not everyone faces the same disadvantage. There are some home-makers who are not disadvantaged when they return to the workforce. So I would be very careful about extending what is a major intervention in favour of older Singaporeans to more and more groups.

Finally, we are expanding our support for our elderly, particularly in healthcare. We have spoken extensively about this. There were some suggestions. Dr Lily Neo had a view with regard to how much money needed to be put into CPF LIFE when an elderly person takes advantage of our Silver Housing Bonus or our Lease Buyback Scheme. This is a valid issue. For those, say, in their mid-70s who want to take advantage of our scheme, it may not make sense for them to top up their CPF all the way to the prevailing Minimum Sum to purchase a CPF LIFE annuity. This is something which we are studying, and we will complete our review within a couple of months.

Let me move on to the middle income group – a very important group. Many Members spoke about this, as I mentioned.

What is our basic strategy to help the middle income group? First and foremost, it is to raise real incomes. That is our most important strategy for helping the middle income group to cope with the cost of living.

We have not done too badly in raising the incomes of our middle income group. It is not very well known, but our middle income households have seen the most significant growth in real terms over the past five years – 3.2% per annum. _(Refer toAnnex C on Pg 1698 ) _

Income growth is slightly lower for lower income households, but the median household has done well compared to the higher end households. This is on a per capita basis, which is the most meaningful indication of income growth.

These rates of growth are rare when looked at internationally over the last five years. In Hong Kong and Taiwan, the median income growth in real terms was negative over the same period. Median income growth in Korea was positive, although lower than ours. And most developed countries have had either lower or negative income growth over the last five years.

Our second strategy is to keep the tax burden low for the middle income group. This is an important feature of our tax system, which is not widely recognised. Our taxes for the middle income group are much lower than in most countries. The middle income group has to pay GST and very limited income taxes, since the income tax schedule starts from the 60th percentile of incomes – and even then, at very low rates. Some pay maid levies or expenditures for their cars. But overall, the tax burden on the middle income group is relatively low by international standards.

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For the lower income group, they get more than $4 back for every dollar paid. For the middle-income family that owns a car – and a car is extremely expensive in Singapore – they get back about 80 cents for every $1 in taxes paid. Without car ownership, they could get back $1.50 in benefits for every dollar in taxes paid. And this is also, by the way, the reason why we are investing very heavily in our public transport system – rail, bus and the whole system - to make it as convenient as possible for the majority of Singaporeans to do with a car. If you do not own a car, even as a middle-income Singaporean, you will get back $1.50 for every $1 you pay over your lifetime. _(Refer toAnnex D on Pg 1699 to 1705 ) _

There are very few systems that provide this. Even for those who want to have a car, for convenience or because they have a large family or elderly family members who need to be ferried around, it is still a very fair system. There are very few systems that would give the average household 80 cents back for every dollar of tax paid.

In short, that is our strategy – keeping taxes low and making sure that the system is as neutral as possible for the middle-income group, while providing the lower income group with substantially more benefits than the taxes they pay.

Several Members – Dr Janil Puthucheary, Dr Lim Wee Kiak, Mr Ang Wei Neng, Mr Desmond Lee, Mr Vikram Nair and Ms Tin Pei Ling highlighted the need to maintain our fiscal sustainability. They emphasised that whatever we do, we have to keep an eye on the long term.

We have to make sure that we can sustain our various initiatives, and not do them for a few years and then start withdrawing them, or start raising taxes to pay for them. We have to think though very carefully − how much should we do, and how we should fund it, in order to sustain a fair and progressive tax system not just for a few years, but well into our children's generation.

The key challenge is healthcare spending. That is going to be the biggest driver of our expenditures over the next 10, 15 and 20 years.

We are currently spending 1.6% of our GDP on healthcare. By 2016, it will go up to 2% of GDP. However, if we extend healthcare spending all the way to 2030, which is when the ageing of our population has set in more fully, then it will increase to around 3.5% of GDP – an extra 2 percentage points of GDP in expenditure from today. This is a significant increase.

Transport expenditure will also remain high for a while especially because we are massively expanding the rail systems. But healthcare expenditure will be a long-term commitment. By 2030, it will be about 3.5% of GDP – and that, too, only if we play it right. It could be much more if we do not play it right.

Ms Sylvia Lim suggested that we follow other developed countries, and spend an average of 6% of GDP on healthcare. Mr Low Thia Khiang also spoke about a First-World social safety net. I do not like the idea of a First-World safety net because what it also means is First-World taxes or First-World debts, and I do not like both ideas.

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To explain this in detail. If we have to take our healthcare spending to 6% of GDP, which is around the global average, it means that we will have to raise taxes very significantly to generate the necessary revenue to fund the system. It would mean increasing the GST to about 20%. Or raising corporate income taxes to above 40%. Or lifting personal income taxes across the board and with the top rate moving to 60%. Some countries, especially the Nordic countries, do have such high tax rates.

And even if we think of using a combination of these different taxes, it is still a significant increase in each of these taxes.

This is why, as Mr Liang Eng Hwa, Mr Hri Kumar and Dr Chia Shi-Lu said, we should focus on healthcare outcomes, instead of spending, as a measure of our healthcare system. We are already getting relatively good outcomes – it is not a perfect system, but one of the better healthcare systems in the world when we look at outcomes. This is despite spending much less, both through government and private spending.

Second, we should focus subsidies on where they are most needed. There will be groups that have affordability problems. We should help them with targeted subsidies, not broadly across the population. In particular, we should encourage people to shift to lower-cost, but good quality care settings. Instead of staying in an acute hospital for a long period and incurring high costs for the individual or family as well as for the taxpayer, they can instead enjoy community-based or home-based care at lower cost. This is what we are doing in this year's Budget. We have provided very substantial subsidies and expanding our capacity for community and home-based care to help people stay at home and yet obtain quality care. This is a very important dimension of keeping healthcare costs down while getting good health outcomes.

Third, we are improving support for the middle income group. Under the measures introduced in this year's Budget, a typical middle income family will see their expenditure on long-term care halved. The Medisave top-up introduced in GST Voucher is also significant. For those who are, say, 75 years or older, the permanent, annual Medisave top-up through the GST Voucher scheme is enough to fund, on average, half of their annual Medisave withdrawals.

Next, risk-pooling. We have to keep the 3M framework going, because that is at the heart of our system. The framework encourages people to save, to think about their health actively from young, because it is also their savings that will eventually be paying for it.

But I agree with Ms Sylvia Lim and Mr Laurence Lien that we have to think about increasing the scope for risk-pooling. We are indeed studying ElderShield to see how we can enhance the scope. MOH is studying how we can, in the right measure, use ElderShield to support the longer-term medical needs of Singaporeans. Likewise, we will study Mr Yeo Guat Kwang's important suggestion on the portable medical insurance. It has not taken off as much as it should and we should look into whether we should provide more incentives to promote portable medical insurance.

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Even with Medisave, there will be some who cannot afford their medical expenses. We want to make sure that these individuals make use of MediFund well before their children's savings are exhausted. There are flexible criteria and, in fact, a growing number from both the lower-income group and also the middle-income group are being helped through MediFund.

VWOs are an important part of our approach to providing long-term care. I think Ms Sylvia Lim has overstated things when she said that the Government is taking the backseat and leaving things to the VWOs. Quite the contrary, there is, in fact, no government that is as aggressive as us in supporting VWOs and working with them. Looking at fiscal support alone, the Community Silver Trust has set aside $1 billion, and together with our tax deduction schemes for donation, this means that for every dollar VWO receives from a donor, 60 cents comes from the Government. This, too, is how we encourage everyone to contribute to our VWOs, and not leave the task only to the Government.

There have been many very useful and thoughtful proposals that Members have made on what we should spend more on. But we must always ask ourselves how it all adds up, and how we fund it.

And remember there is a major driver of rising costs − the ageing of the workforce. Dr Lim Wee Kiak has indeed asked how we are going to fund this.

For healthcare spending, we are going to go up by another 1.5 percentage points of GDP beyond 2016, or 2 percentage points of GDP more than what we spend today. With the ageing of the workforce, there will be increased utilisation of healthcare services and long-term care services. Demand will go up and, as technology improves, people will want better care. This is why we must expect healthcare expenditure to go up another 2 percentage points of GDP by 2030.

We must, therefore, have a strategy to fund our expenditures for the next 10 to 15 years after 2016. We should not be forced to cut back on funding for education, defence and the other fundamentals that keep Singapore going.

There are several elements to this strategy. It means, first, that we stay competitive and grow our economy in a sustainable basis, because that is the biggest source of our revenues.

Second, we need to find new sources of revenues. Our Budget is fine for the next five years. That is why we have been setting aside monies now in trust funds and endowment funds, to fund future spending, whilst we still have the resources. But beyond the next five years, we will have to think of raising revenues.

Third, we must spend judiciously in every area, both for development and operational expenditures. Always spend with outcomes in mind, not for show.

And, finally, we have to be prudent and targeted in our subsidies. People do need more help, but we have to be very clear about who needs the most help and target our subsidies carefully.

Many countries in the West have allowed social expenditures to creep up gradually, thinking that each incremental rise will be affordable. However, each term of Government – whether it is a conservative of left-of-centre – has found itself pressured to raise the subsidies or include more people in the subsidies. The overall bill goes up, from one term to the next. And it is almost always the middle-income groups that end up paying much higher taxes.

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This also addresses Member Denise Phua's point. There is a limit to how high you can push taxes at the upper end. The reality of the matter is that our income taxes are significantly higher at the top end of incomes compared to Hong Kong. So the competition for talent is real.

Half of our personal income taxes are paid by non-citizens. But even if we consider Singaporeans, they are mobile. If we look at many graduates, increasingly, many of them start their careers in Hong Kong or elsewhere. They are well-educated. They are talented. They too are mobile. We have to ensure that we keep our best talents here. We will make our system more progressive over time, particularly with regard to property taxes. But there is a limit to how high taxes can go at the top end, without hurting our competitiveness. This is the reason why we have got to guard how we spend and what we spend on, so that we avoid imposing too heavy a burden on the middle class.

Finally, Mr Speaker, Sir, we come to the issue of why the Government is taking the extraordinary step of spending $1.1 billion over 10 years to increase bus capacity.

Several Members have asked about this, including Dr Amy Khor, Mr Seng Han Thong, Mr Lim Biow Chuan and Mr Pritam Singh. There are, in particular, questions on whether this is a subsidy to the transport operators and their shareholders.

The Government considered its investment to expand bus capacity very carefully. This was not a normal budgetary decision. It is an important step, to reduce waiting times and crowdedness that Singaporeans experience daily as they take public buses.

Let me start by explaining what the Public Transport Operators (PTOs) themselves are responsible for. The PTOs are required to expand their fleets, their bus fleets to cater to the growth in passenger numbers, as well as to ensure that they meet the service levels that are mandated under the existing regulatory framework. This is why, in addition to operating the existing bus fleet of about 4,000 buses, they will have to buy 250 additional buses to achieve this; and they will fund this on their own.

The Government is putting $1.1 billion into the bus system in order to step up bus service levels beyond the current service standards that are required of the PTOs.

It will increase bus capacity on existing heavily-utilised routes making them less crowded and giving commuters a more pleasant journey.

Almost all feeder buses will run every 10 minutes or less – for two hours in the morning, and the evening, two-hour peak periods instead of the one-hour peak period under the current service level requirements.

Commuters on existing routes will thus benefit both from shorter waiting times and less crowded bus journeys.

And a number of new bus services, in addition to existing bus services, will be added to improve connectivity, and provide commuters with more public transport choices.

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So these are improvements that commuters have been hoping for and waiting for.

As a condition for the Government's investment, the PTOs will have to deliver on these service level improvements, which go beyond existing regulatory requirements.

We cannot simply mandate that the PTOs add these 550 buses to improve service levels. First, because it goes significantly beyond the current service levels in the current regulatory framework. Second, the PTOs' bus operations are already running operating losses, and the 550 additional buses, in particular, are projected to be a loss-making operation. The cost of acquiring and running the 550 buses is beyond what can be recovered from revenues in running the buses.

Take the example of improving the frequency of feeder bus services. Increasing the number of buses to make this possible will shorten waiting times but will add little to revenues, since the total number of passengers taking the service will remain largely the same. So, more buses, more drivers, more fuel but no similar increase in revenues because it is essentially the same pool of passengers. They now have to wait shorter times and enjoy less crowded journeys, but it is essentially the same pool.

Without the Government stepping in, these significant service level improvements would only have been achievable if fares have been raised sharply. The 550 additional buses mean significantly higher costs – not only to purchase the buses, but also because more than 1,000 drivers would need to be hired and paid a good wage, as Mr Seng Han Thong and NMP Mary Liew have pointed out. Fare revenues of the PTOs would have had to go up by about 12% to 13% – which translates into an increase in passenger fares of about 15 cents per journey – if the PTOs had to achieve this on their own. How much is 12% to 13%? In the last five years since 2006, fares went up by 0.3%. So, 12% to 13% is quite a significant leap compared to what we have seen in the last five years. That would have been the only way which we could have achieved these service level improvements if the Government had not stepped in.

Hence, the reality of the matter is that the $1.1 billion Government package, or $110 million per year, is a subsidy for public transport commuters, and not a subsidy for the PTOs. It will improve service levels for commuters, not the profits of the PTOs.

The $1.1 billion package is expected to cover the losses on the 550 buses – in other words, the additional costs, net of revenues. Of the $1.1 billion package, $280 million is budgeted for the purchase of the 550 buses over the next five years, and $820 million to cover the net operating costs over the 10 years. This is based on the best estimates currently. However, we will be monitoring and scrutinising the PTOs' actual costs for both the purchase and running of the buses. Should their losses turn out to be lower than expected, the Government funding will be reduced correspondingly. So, one way or another, there are no profits to be made from the 550 buses.

The $1.1 billion for additional buses complements the $60 billion we are putting into the expansion of the rail system. It will take several years for these new rail lines to come on stream or all of them to come on stream. That is why we are stepping in now to add bus capacity and quickly improve the daily experience of commuters. It is what commuters want, and we have assessed that it is worth the public investment. Both the $1.1 billion over the next 10 years for bus capacity, and the $60 billion that we are putting into the rail system, are worthwhile public investments.

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Despite this Government package and independent of this Government package, regular and incremental fare increases will continue to be necessary, as wages and operating costs rise, so that the bus industry can stay financially viable. The Government will also continue to make sure that needy commuters get adequate assistance for their transport expenses. The MOT will elaborate further on all these issues during their COS.

Mr Speaker, Sir, let me now conclude. Members of the House have voiced strong support for the Budget - both the restructuring of the economy so as to improve productivity and raise wages of Singaporeans, as well as our efforts to build a fair and inclusive society.

But as Mr Seah Kian Peng and Dr Lam Pin Min have pointed out, building an inclusive society will always be work-in-progress.

We do not claim to have a perfect system. But we are not doing badly:

Median Singaporean incomes have risen faster in the last five years than in any of our peers in Asia – the NIEs or Japan, or any of the developed countries.

Our unemployment rates are the lowest in Asia and certainly the lowest amongst the developed countries.

Social mobility through education remains higher than in most other countries, certainly in most of the developed countries.

Home ownership remains amongst the highest in the world, and in particular home ownership amongst our lower income group is without equal internationally;

We are still rated AAA by S&P and Moody's – a diminishing breed.

But as Members have pointed out, none of what we aim to achieve is about Government policies alone.

As Mr Desmond Lee pointed out very eloquently yesterday evening, none of these measures we are taking will automatically foster a society where people care for one another or for the less fortunate.

Dr Amy Khor and Mr Laurence Lien had emphasised that we have got to involve everyone, tap on every group, as everyone has something unique to offer to Singapore, something unique to offer others.

As Dr Lam Pin Min and Ms Tin Pei Ling have said, we have got to do more to build a resilient society; we are not quite there yet. We have got to do more to build pride and dignity in every job, no matter how humble.

As Mr Seng Han Thong had said, we have got to make sure that all the Singaporeans like Bao Pings get the support that they need to live long and enjoy their lives.

As Ms Irene Ng pointed out yesterday, we have got to preserve a state of self-reliance. And as Dr Lim Wee Kiak pointed out, preserve a sense of filial piety and responsibility to the family that are also at risk of being lost over time.

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And as Ms Janice Koh pointed out, building an inclusive society is also the role of Singaporeans, like our local artists, who help us to define what we are as Singaporeans, even as we become a global city.

So, it is about all of us, what we do daily, what we think of doing more of each year, what we will do with our fellow citizens to continue our journey towards being an inclusive society. [ Applause .]

Mr Speaker: Yes, Mr Low. Please keep it short.

Mr Low Thia Khiang: Thank you, Sir. The Deputy Prime Minister said earlier that the Workers' Party has shifted its position on foreign workers. Sir, this is incorrect. Nowhere, either inside or outside this House, have we said that Singapore does not need foreign workers. The main complaint of the Party as well as people outside this House is that foreign workers and foreigners are taking away Singaporeans jobs and are depressing wages of Singaporeans. To clarify further, he refers to our manifesto. Our manifesto stated that we have to carefully calibrate foreign workers in relation to different levels of industries. We also said that we welcome foreigners who can add value to Singaporeans. So, nowhere have we said that we do not need foreign workers, or we do not need foreigners to help Singaporeans. That is the first clarification I want to make.

Sir, the Deputy Prime Minister said that there is no need to go into individual industries and the current levers or controls − the dependency ratio as well as the workers' levy − are sufficient at that sectoral level. Sir, I am not convinced. I am of the view that if you want to do productivity successfully, we need micro-management, and not just macro-management. Each industry has its own feature and its own difficulty. Foreign workers are a life line to them, at least it is now. So, I am not convinced that we should just use a micro lever to manage and achieve the productivity growth and the targets we want.

Sir, the next clarification is this. The Deputy Prime Minister referred to my speech on First World countries' social safety net, which he says he is very worried about. It means also the kind of level of tax. I suppose the Deputy Prime Minister knows very well that the First World countries are also basically looking at how to ensure that their own citizens are well looked after, whether in terms of healthcare or retirement. So, these are things that we are looking at today. Of course, I understand the Government is particular about outcome and the challenge exactly to this Government is: can we have the outcome of the social safety net in the Western countries, in the First World countries, without the same level of tax that we can have?

Mr Tharman Shanmugaratnam: On the Member's last hope, I suggest he write a novel on this. It will sell very well in the West. But let me address his questions in turn. First, the Workers' Party has said, I remember vividly the debates and I know what is in its manifesto, the Member did feel that we had let in too many foreign workers at the lower skill end. His recent comments, however, in this debate, expressed grave concern over how fast we are tightening our Dependency Ratio Ceiling for work permit holders, and did recognise that, even at the lower end, this has to be a very careful balance, and that, I think, shares our perspective. I hope this sting he had taken out of his earlier criticisms is not just a political strategy because we know that it is sensitive to his background among SMEs and so on about having to restructure but also recognises the more basic reality, which is, that the growth of foreign workers in Singapore has not only benefited SMEs but has also benefited Singaporeans' incomes. I have showed the data three years in a row: low-income Singaporeans, middle-income Singaporeans, what has happened. Yes, there will always be competition in individual jobs. But, overall, when we look at the dynamic that is created in our economy, Singaporeans have benefited and have benefited more than other countries have – almost every country that is shown on the chart. So, it has been a successful strategy and that was the reason why he was wrong in criticising the Government for a strategy of allowing companies to stay competitive and grow, using foreign workers.

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Second, on micro-management. This is a practical issue. I think the Member made the suggestion with the best of intentions. When you meet businessmen, they will often ask you, "Why not, give me a bit more. My business is one that I really cannot attract Singaporeans. It is too far, they would not come; the work is too dirty." How did businesses in Germany, the Mittelstand, become what they are today? It is by constant upgrading. Why are they able to beat lower cost competitors in China? It is by constant upgrading so that a dirty job became a cleaner job, more skills, more knowledge. So, our challenge, as Mr Lim Swee Say said yesterday, is that restructuring is unavoidable, the alternative is even more painful, let us work with the SMEs to help them restructure. There is no easy solution to this. I think the Member made it with the best of intentions. But I pointed out that the result of that approach will be faster foreign worker growth, lower productivity growth and, thirdly, some inequity between firms, some unfairness between firms, which I am sure he did not intend. But that would be the outcome of that strategy.

Third, on the issue of First-World safety net. The truth of the matter is that this has not just been an aspiration of First-World governments to provide this high level safety net for their citizens. It has inadvertently been a trick on future generations. They have postponed the bill to future generations precisely at the wrong time, at a time when the working population is getting smaller relative to the older population. Some people knew it, but went about it because that was in the nature of single-term democratic politics where you do not look beyond what happens in one term. And many people did not know about it. Populations were fooled, and now populations are paying the price, which is why it is not just a matter of financial crisis they are going through, but it is social crisis that is going to last for many years. So, let us avoid getting anywhere even close to that.

Mr Speaker: Mr Cedric Foo, I will give you a minute.

Mr Cedric Foo Chee Keng (Pioneer): Sir, I would like to ask the Deputy Prime Minister about the funding of buses. It is quite reassuring to hear him say that it is really for the benefit of commuters and not the shareholders of SBS Transit and SMRT. But the projection that they will make losses as a result of this incremental injection of buses and incremental operating costs is an assumption. Ridership can change in many ways. As networks are added, we may have more people travelling on it, and we may be very successful as a tourism hub. Would the Deputy Prime Minister ring-fence this particular injection and the profit and loss from this particular injection, and adjust for it as necessary?

Mr Tharman Shanmugaratnam: I thank Mr Cedric Foo for his question. In fact, this is what I would say: we expect them to make losses based on all existing parameters. If we are lucky and somehow the system is re-engineered so that the losses are less than expected or, most unlikely, but if they turn a profit, that would not come from the Government. None of the $1.1 billion would be reduced as their losses are reduced, and if they make a profit, it all comes back to us. So, none of the $1.1 billion will go towards profits for the public transport operators. It would be ring-fenced, their accounts would be scrutinised, and we would be paying according to what the costs actually are. There would be a review at five years to check the parameters for the agreement. There is no reason why we would want to subsidise the profits of public transport operators. There is no reason why we want to do it. We are doing this to help consumers. This is a subsidy to consumers so that, as we are waiting for the major expansion of our rail system, we can improve service levels on a daily basis.

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Question put, and agreed to.

Resolved, "That Parliament approves the financial policy of the Government for the financial year 1 April 2012 to 31 March 2013."