SINGAPORE — The Republic's strategy for moderating the cost of living for all households is to make sure that essential public services are efficiently run and cost-effective, while ensuring the Government stays lean and efficient, said Prime Minister Lee Hsien Loong.
This approach includes requiring public-service providers to break even, which puts pressure on them to likewise be efficient and keep their costs down, he added at the opening of NTUC's National Delegates' Conference on Nov 22.
At the same time, the Government recognises that some households will need help, and it provides this in the form of cash or vouchers such as U-Save rebates, public transport vouchers and GST Vouchers. Some households will get up to $9,000 of direct help in this financial year, he noted.
Targeted help is the better way compared to other countries' across-the-board subsidies for public services, said PM Lee.
Households that benefit the most from across-the-board subsidies are those that use the most water or electricity, and they are usually not the needy ones, he said.
"Also if I subsidised it across the board, then households will have no incentive to save, to conserve, because they don't bear the proper cost."
His remarks came amid recent fee hikes that will accentuate pocket concerns of Singaporeans.
National water agency PUB announced in September that the price of water will rise in two steps from April 2024, to cost 50 cents more per cubic m by April 2025.
Electricity tariffs have climbed from 27.74 cents per kWh to 28.7 cents per kWh for October to December, due to higher fuel and operating costs. Electricity prices are reviewed every quarter based on guidelines set by the Energy Market Authority.
On Nov 7, Parliament debated a motion filed by the Workers' Party that urged the Government to relook its policies to help Singaporeans cope with rising costs.
While opposition MPs contended that the country is facing "a cost-of-living crisis" and needed to undertake structural reform, the ruling party emphasised that the Government has been renewing its policies, and that it has been doing more to cushion the impact of rising prices on Singaporeans.
MPs on both sides agreed that rising costs are a concern and that aid must be given to those who need it. People's Action Party MPs voted in favour of an amended motion that acknowledged cost of living is a global concern, and which called on the Government to continue pursuing policies that lower such pressures on Singaporeans without undermining fiscal sustainability and burdening future generations.
During the debate, Acting Transport Minister Chee Hong Tat refuted Non-Constituency MP Leong Mun Wai's charge that the Government's model for public services is profit-seeking, citing how the Government greatly subsidises public transport operations.
On Nov 22, PM Lee said people sometimes argue that since such things are public services, they should not aim to earn a profit at all. But that would be the wrong approach, as public transport and utility providers would then have no pressure to run efficiently, he added.
"Just because a company is not making a profit does not mean it is giving you a cheap and good service. It may mean that it is running inefficiently, that you do not know that you are paying more, but it is not delivering value to you. You are just paying more and getting less."
He said: "It is better to let these service providers earn a reasonable profit, so that they have the resources to reinvest and improve services, and also the incentive to do this. Because if they work harder, if they do better, they earn a little bit more."
Singapore's approach has worked well. Its public transport system is of a high standard while fares are among the lowest in the developed world. Utilities are reliable and affordable, and so is quality healthcare, he added.
But this way means that fees have to go up from time to time when the cost of providing services rises.
While the authorities will always strive to trim costs further and operate more efficiently, and not simply pass on higher expenses to consumers, price increases that are unavoidable should not be pushed to the future, he said.
"But we will also, if necessary, be more generous with the targeted support to households," he added.
This was done with public transport fares, with the Government absorbing two-thirds of what the increase should be. This will cost public coffers $300 million for 2023.
This is also why the Assurance Package was enhanced several times in 2023 to provide households with more Community Development Council vouchers, Cost of Living Special Payments and additional U-Save vouchers, he noted.
PM Lee said this approach has worked. While in previous downturns, more residents had turned up at Meet-the-People Sessions seeking help with utility bills, the number of such appeals has dropped.
Noting that all the Government's programmes are ultimately paid for by taxpayers, PM Lee said it has kept this burden as low as possible, and much lower than in most developed countries.
For instance, while Singapore's government revenue from taxes and fees makes up about 15 per cent of gross domestic product (GDP), Italy spends this proportion of GDP on state pensions alone.
While the Republic's goods and services tax (GST) rate will rise to nine per cent next year, Italy's equivalent value-added tax rate is 22 per cent, while it is 25 per cent in Sweden and Denmark.
This approach of keeping government spending and taxes low means that workers enjoy the fruits of their labour and have more autonomy to decide how to spend their income, said PM Lee.
"We are keeping our public services financially sustainable and of a high standard in the long term, while in the short term giving households extra help according to their needs and sharing the burden fairly with everybody," he added.
"This is how the PAP Government keeps faith with workers. We do right by them, through good times and bad. And we will always do that."
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This article was first published in The Straits Times. Permission required for reproduction.