Budget largesse for the people

It took a blogger to point out the people were getting back their own money. Until then, the gushing Singapore media coverage suggested the government had turned Santa Claus.

Updates poured fast and furious on the internet as Singapore finance minister Tharman Shanmugaratnam presented this year’s budget last Friday. The city-state’s mainstream media websites fell over themselves, highlighting the handouts to the people. “All Singaporeans to get up to S$800 in cash,” reported The Straits Times. The minister said the budget would provide S$6.6 billion in benefits for Singaporeans, of which S$3.2 billion would be given out this year. Channel NewsAsia went one better and claimed in a headline, “Government hands out S$13 billion in benefits to Singaporeans.”

The news channel, owned by the government-linked MediaCorp, asserted: ”Most Singaporeans happy with 2011 budget.” The Straits Times, however, ran an online poll and reported: “Most Singaporeans wanted more from Budget 2011.” Seventy per cent of the online respondents said the budget did not meet their expectations.

Are Singaporeans hard to please? One may not have to wait too long to find out. “Singapore budget filled with handouts ahead of elections”, reported Reuters. By the weekend, public speculation had even fastened on a likely election date. “Pundits and politicians alike are predicting that the general election will be held in May” because the money will be given out by then, reported The Sunday Times.

The government gave money to the people before the last general election. A local blogger recalled: “In 2006, the government gave out up to $800 in cash as part of the ‘progress package’. The money was deposited into Singaporeans bank account on May 1, 2006 and the election was held on May 6, 2006.” The government won more than 66 per cent of the valid votes, and 82 of the 84 elected MPs belong to the ruling People’s Action Party. Only two belong to the opposition.

Much has changed since the last election. Housing prices have gone up almost 70 per cent since 2006, reported the Associated Press, which noted: “A flood of cheap immigrant labour — and stiff competition for manufacturing jobs from Asian neighbours like China and Vietnam — has kept wages stagnant for many and widened the gulf between a very wealthy minority and the island’s poorest.” It added: “Despite rapid economic growth, the U.N says income inequality in Singapore has risen steadily over the last decade and is the second highest behind Hong Kong among developed nations. From 1998 to 2008, the bottom 20 per cent of households saw their income drop an average of 2.7 percent while the salaries of the richest 20 per cent rose by more than half.”

Not everyone is happy with the newly opened casinos or mad about the Singapore Grand Prix Formula 1 car race held every year since 2008. “Some feel that we’re creating this place to be a playground for the rich,” said Eugene Tan, assistant professor at Singapore Management University.

Even the government is concerned about the growing income gap. Finance Minister Tharman Shanmugaratnam said in his budget statement: “We will do more to build an inclusive society, where lower-income citizens can aspire and work towards a better life.” So the poor are getting bigger handouts than others. But Singapore is not about to become a welfare state. “We must avoid the mistakes of the developed countries which have built up unsustainable systems of entitlements – in healthcare, unemployment, insurance and pensions,” the minister said. “This is why we are focusing on helping the low-income group through education, employment and home ownership.”

Instead of unemployment benefits, there is Workfare to top up the wages of the older, lower-income workers. More than 400,000 working Singaporeans will benefit from a Workfare special bonus in this year’s budget. The education ministry has the second biggest budget – more than S$9.7 billion this year; only the defence ministry gets more: over S$11.5 billion. The government is also introducing a special housing grant this year to help lower-income families buy their first home.

Even the opposition MP Chiam See Tong called it: “A fantastic election budget for the PAP. They offer so many things. Poor people living in one-room flats will, of course, be attracted to it.”

But can it reduce the income gap? “To imagine that any budget would remove the inequalities in our society is a pipe dream,” wrote Eugene Tan in Today.

The world wasn’t always like this, reminds Robert Skidelsky, Professor Emeritus of Political Economy at Warwick University. “Indeed, the ‘spirit of capitalism’ entered human affairs rather late in history… only in the 18th century,” he wrote in an article, titled Life After Capitalism.”The evidence suggests that economies would be more stable and citizens happier if wealth and income were more evenly distributed. The economic justification for large income inequalities – the need to stimulate people to be more productive – collapses when growth ceases to be so important.”

Singapore is entering a period of slower growth. The official forecast is four to six per cent growth this year. Prime Minister Lee Hsien Loong is already looking beyond the coming polls. He could well campaign on the slogan: “You’ve never had it so good.” Singapore’s 14.5 per cent growth last year is its record best.

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