PM Lee: Subsidising fare, fee hikes to lower Singapore’s cost of living will cost taxpayers more, needy households will benefit less

SINGAPORE, Nov 22 — Subsidising utilities across the board, as some countries do, will lead to higher spending by the government and taxpayers, while households that need the most help benefit less, said Prime Minister Lee Hsien Loong today.

“With across-the-board subsidies, the households benefitting most are the ones using the most water or electricity, and these are usually not needy households,” said Lee.

He added that with cheap water and electricity, households will also have no incentive to conserve “because they do not bear the proper cost”.

Speaking at the opening ceremony of the National Trades Union Congress (NTUC) National Delegates’ Conference 2023 at Orchid Country Club, Lee said Singapore’s approach is one where the People’s Action Party (PAP) runs a lean and efficient government while ensuring essential public services are run efficiently and cost-efficiently works better.

The conference, which happens once every four years, was attended by about 1,500 union leaders, tripartite partners and other guests.

Lee said households that need extra help are given targeted and direct assistance in the form of cash or vouchers like U-Save rebates and public transport vouchers.

“In difficult years like this one, when economic growth is slow, inflation is high, and wages are not outpacing inflation, we need to think what more we can do to help Singaporeans cope,” he said.

Lee said that when it comes to raising fees, the government adopts the approach of delaying non-essential fee hikes for “a while longer”, or moderating any immediate increases.

To this, he cited the government spending S$300 million (RM1.05 billion) this year to absorb two-thirds of the public transport fare hike, or 15.6 per cent, which was announced in September. The move will defer the hike to future fare review exercises.

But when increases are inevitable, the Government is more generous with targeted support to households, he added.

Why this matters

Lee’s speech comes after several fees and tariffs hikes for utilities were announced in 2023.

In September, the national water agency PUB and the Ministry of Sustainability and the Environment announced water prices will rise by a total of 18.2 per cent over two years starting April 1, 2024.

Bus and train fares to increase by 10 to 11 cents from December 2023, the Public Transport Council said in September, citing rising energy prices and inflation.

The moves led to a parliamentary motion on the cost of living in Singapore tabled by the Workers’ Party (WP) in October, which was passed in Parliament following several significant amendments from the PAP.

While both parties agreed that the cost of living was an issue for many, both sides of the aisle clashed over how to deal with such concerns.

WP’s original motion was titled “cost of living crisis” and called on the Government to review its policies so as to lower cost of living pressures on Singaporeans.

PAP Member of Parliament Liang Eng Hwa from Bukit Panjang Single Member Constituency proposed amendments to WP’s motion stating that MPs acknowledge that cost of living is a global concern and calls on the government to continue pursuing policies to lower cost of living pressures without undermining fiscal sustainability and burdening future generations of Singaporeans.

To moderate the pressures of cost of living on households, Lee said today that the government is lean and essential public services are run efficiently and cost-effectively. He cited several reasons why this is the case:

• Singapore’s government revenue from taxes and fees comprises only about 15 per cent of Singapore’s economic output, or Gross Domestic Product (GDP)

• This is unlike other countries, such as Italy, which spends about 15.3 per cent of GDP in 2022 on state pensions alone

• While Singapore’s Goods and Services Tax (GST) will be raised to 9 per cent by 2024, a similar consumption tax in Italy is 22 per cent

• “By keeping government spending and taxes low, workers can enjoy the fruits of their own labour directly,” said Lee, adding Singaporeans are “getting very good value for their money”

• On ensuring essential public services are run efficiently and cost-effectively, Lee noted that somebody has to pay for these services. That means either the user pays through tariffs and fares, or the government subsidises them, which means taxpayers pay indirectly through higher taxes

• To avoid putting the whole burden on taxpayers, users pay reasonable charges for the services they use

• Lee also countered the argument that public services should not aim to earn a profit, noting that this removes pressure on such service providers to run efficiently

• Earning a reasonable profit gives them the resources to re-invest to improve services, and provides the incentive to do so, he added

Why targeted support works

Lee said with such an approach taken by the PAP government, Singaporeans benefit from a high-standard public transport system, reliable and affordable utilities and access to affordable and high-quality healthcare.

“This strategy has moderated the cost of living for all households. But some households will still need extra help, which we have provided,” said Lee, referring to the U-Save rebates and GST vouchers that help to offset these costs.

If the government were to use across-the-board subsidies, households benefitting the most are those using these services the most which “are usually not needy households”.

It also removes the incentives for households to conserve their utilities spent.

But in “difficult years like this one”, Lee said fee increases have to be thought through “extra hard”.

Though some price increases cannot be avoided, Lee said the government’s approach is to continue with them but “be more generous” with the targeted support to households, such as by enhancing the Assurance Package to further cushion the impact of the GST hike.

“What we are doing keeps public services financially sustainable and of a high standard for the long-term, while in the short-term households get extra help according to their need, so that we share the burden fairly,” said Lee.

“This is how the PAP government keeps faith with workers, and does right by them, through good times and bad.” — TODAY