Budget 2019: Govt ministers’ conflicting views on funding source of Merdeka Package

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Photo: You Tube screengrab from Asia House https://www.youtube.com/watch?v=3Ck7uuhCiGc and IPS (Singapore) https://www.youtube.com/watch?v=HqRlS9KV0KI

Healthcare is among the top priorities in Singapore’s 2019 budget, yet, two key government ministers disagree on where the source of funding will come from for the Merdeka Package which is the centerpiece of the government’s healthcare program.

Trade and Industry Minister Chan Chun Sing said that the goods and services tax (GST) will definitely not be funding Merdeka and all other proposed programs. On the other hand, Finance Minister Heng Swee Keat clearly emphasized that increasing taxes is imperative so that all Singaporeans can have a part in the responsibility and in realising the projects that are designed to benefit them.

Quoting Chan, he said, “”If we decide to have the Merdeka Generation Package… then it is the responsibility of this term of government to harness its resources to put them into a fund, to make sure that this burden is not passed on to the next government or future governments.” Revenue from the two-point GST increase – to take place sometime between 2021 and 2025 – is not funding the package,” he added.

However, it would appear that Finance Minister Heng Swee Keat is singing a different tune from Minister Chan. According to Mr. Heng, the decision to increase GST — from its current 7% to 9% — was a difficult one and was made to help fund expenditure in areas such as healthcare, security, and other social spending.

Healthcare expenditure, according to the Finance Minister, has been increasing over the years, with the government spending S$3.9 billion in Financial Year (FY) 2011, a figure that rose to S$10.2 billion in FY18.

In the next 10 years, an ageing population and the constant rise of chronic illnesses will mean designing fresh and novel healthcare capacities to meet and respond to mounting demands and investing in avant-garde medical technologies that could boost care quality – all of which can lead to a spending that will leapfrog expenditure on education within the next decade, he said.

With these in mind, Mr Heng said: “The responsible way to pay for them is through taxation so that every generation pays its share. We should not borrow for recurrent spending because this will put the burden of recurrent spending on future generations.”

Mr. Heng admitted that the decision to raise the goods and services tax (GST) was a difficult one, but that it is the most appropriate option to help Singapore raise revenues at this stage.

“We looked at all the different taxes we could change, even non-tax measures that we could take. Each of these has its pluses and minuses, and when we looked at the overall scheme of things, we decided that at this stage, the GST is still the most appropriate,” Mr. Heng emphasized.

In a convention initiated by the People’s Action Party, Prime Minister Lee Hsien Loong reiterated that Singapore will be raising its taxes, as government spending on investments and social services grows.

PM Lee stressed during that convention that Minister Heng was right when he said during his Budget speech in 2018 that “raising taxes is not a matter of whether, but when.”

In the final analysis, whether the Merdeka funding will be sourced from taxation proceeds or will be sourced outside of it remains a big question. What is certain though is that because of the intensifying need for quality healthcare and the current rise of the ageing population in Singapore, the government will have to make sure that it fulfils its promises and that it finds a viable source of funding for its healthcare program now.