MP Inderjit Singh says govt policies may have contributed to inflation
By Asha Popatlal, Channel NewsAsia | Posted: 25 February 2008 1546 hrs

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	Special Report • Singapore Budget 2008

SINGAPORE: The Budget Debate kicked off in Parliament on Monday with MPs taking a long and hard look at what has been troubling many Singaporeans - growing cost increases.

MP for Ang Mo Kio GRC, Inderjit Singh, pointed out that the "grow-at-all-costs" policy of the government might have overheated the economy and worsened the income divide.

From electronic road pricing (ERP) and public transport fares to the Skilled Foreign Worker levy to healthcare charges, MPs cited a litany of recent cost increases.

While some may have been beyond the government's control, Mr Inderjit Singh questioned whether all the hikes were necessary and if some could have been deferred.

He said: "I feel a significant part of the inflation has been caused by factors that we could have controlled.

"In the last two years, the government has contributed to inflation by allowing multiple cost increases, both directly or through policy changes that resulted in cost increases.

"The end result is an era of very high cost increases, high inflation not supported by enough wage increases, especially for the lower and lower middle income Singaporeans and companies."

The impact on the needy is telling. With real income shrinking as well, statistics show the lower 20 percent of Singaporeans are suffering effectively higher inflation rates than the top 20 percent.

Mr Inderjit Singh argued for a review of what he called the "boom and bust" policy of growing as fast as possible during the good years to compensate for periods of slower growth, even if some Singaporeans could not keep up.

In addition, he felt the government might have been too quick to impose the GST hike last year, a significant cost increase which triggered off other increases which were passed on to consumers.

"In light of the booming economy which should have been visible by mid-2007, the Government could have made the late decision to hold off the GST rise by a year or two," said Mr Inderjit Singh.

He recalled how the Finance Minister had stoutly defended the 2% point GST hike, citing reduction of government income from other sources and the need to generate enough money to fund Singapore's growth.

But now, instead of projected Budget deficit of $0.7billion, the government had a surplus of $6.4 billion, leaving the government to face a 'pleasantly embarrassing outcome'.

This point was also highlighted by other MPs who spoke during the Budget debate on Monday.

With Singaporeans experiencing one of the highest spikes in the cost of living in the last five years, MP for Pasir Ris-Punggol GRC, Michael Palmer, said direct assistance could help.

He said the government could set aside some money for a contingency fund from the Budget surplus to provide an inflation relief package, similar to the GST Offset package and specifically targeted at the low and middle income earners.

Mr Palmer said: "We expect inflation to rise to between 4.5% and 5.5% (this year). That represents at least a 900% increase from the 2005 figure and a 450% increase from the 2006 figure. If inflation hits 4.5% this year, it will still be more than a 200% increase from last year. So when the Minister said that 'inflation today is higher than what we have been used to in Singapore for many years', in my humble opinion, that may be understating the matter somewhat," he said.

His bottomline? The fear of creating an expectation of handouts should not deter the government from being caring and giving help when it has the resources to do so. - CNA/ir