RISING COST OF LIVING

RISING COST OF LIVING:

(Assistance to low income Singaporeans): 2.

Mdm Halimah Yacob asked the Minister for Finance whether the Government will consider introducing additional measures to assist low income Singaporeans who are finding it difficult to cope with the rising cost of living with the high rate of inflation which is projected to increase even further this year.

**Mr Tharman Shanmugaratnam: ** Mr Speaker, Sir, the Government has been keeping a close watch on inflation and the cost of living.

The main reasons for the current pressures on the cost of living are the increase in oil and food prices globally. However, CPI inflation has also increased for technical reasons, which do not affect

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most households. As explained by the Minister for Trade and Industry in Parliament in November last year, the CPI reflects the increase in the Annual Values of homes. However, as 95% of Singaporeans own their own homes and do not pay rental, they are not affected by this component of the CPI increase. So this is a technical factor.

Another reason for the high CPI inflation figure is the increase in the GST rate from 5% to 7% that took place in July last year. However, this has been more than offset by the assistance package that the Government provided to Singaporeans. Lower income families have received offsets which are several times larger than the increase in their GST payouts.

We should also realise that the GST change has caused only a one-off increase in prices, and not a continuing price rise. The CPI inflation figure continues to show the impact of the GST increase, because the CPI inflation figures are computed by comparing prices this month with prices 12 months ago, ie, before July last year when we increased the GST rate. But, in fact, if we compare prices today with prices, say, in September last year, there has been little further increase due to the GST increase.

The Government is helping lower income Singaporeans through Workfare, through ComCare and Medifund, and also through the many other targeted subsidies in health, education, housing and utilities. As the Prime Minister said in his New Year message, our finances permitting, we should have something more in the FY2008 Budget to help needy and older Singaporeans.

Mdm Halimah Yacob (Jurong): Sir, I want to thank the Minister for his explanation. I look forward to the measures to be introduced in the Budget for the needy and retired Singaporeans, in

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particular, because they have a very fixed income and some may not have any income at all. I would like to ask the Minister to give us details about how much GST credits have the three-roomers and those in smaller flats enjoyed in order to help them offset the GST increase.

I would also like to ask the Minister, when we have the Budget, whether he would review some of the criteria for social assistance to be provided because, in most cases, these are drawn at a certain income criterion that may be already outdated. Could the Ministry of Finance also look into that and make appropriate recommendations?

**Mr Tharman Shanmugaratnam: ** Sir, I would like to thank Mdm Halimah for her questions. On the first question of how much assistance has been provided to needy Singaporeans living in three-room flats and below, if we take the GST offset package alone which was introduced in last year's Budget but disbursed at various points over FY2007, a typical three-room household would receive in this current fiscal year about $1,050, which is several times larger than the increase in expenditure that they would have incurred as a result of the GST increase. So it goes well beyond compensating for the GST increase. It involves cash credits in the form of the GST credits and the Senior Citizens' Bonus. It includes utilities discounts and it includes what we did in a range of other sectors to provide support for needy Singaporeans. It is quite a substantial package of support.

On top of that, of course, we continue to provide our health subsidies, Medifund for the very poor as well as our other health subsidies, education subsidies - financial assistance schemes in education last year were substantially increased by widening the criteria so that more families can benefit - and various other subsidy programmes. These are on-going and this

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will continue to be our strategy. We will continue on a targeted and efficient basis to help needy Singaporeans.