Day 1 of Budget 2023 debate: MPs raise concerns for 'sandwiched' middle class, working mothers
More than two dozen MPs spoke on the Budget delivered by Deputy Prime Minister and Finance Minister Lawrence Wong last week.
SINGAPORE: A sandwiched middle class, working mothers receiving less tax relief, employees getting less take-home pay, and more pressure on employers were among concerns raised on the first day of parliamentary debates on Budget 2023.
Over more than seven hours on Wednesday (Feb 22), 27 Members of Parliament (MPs) – including Leader of the Opposition Pritam Singh – aired their views on the Budget delivered by Deputy Prime Minister and Finance Minister Lawrence Wong last week.
Several parliamentarians made reference to the importance of redistribution and strengthening Singapore's social compact through the Budget, with MPs pointing out where they believed the Government could be doing more.
The debate resumes on Thursday.
Listen: Did Budget 2023 give help where it was needed?
In his speech, Mr Singh described one Singapore where high salaries and opportunities abound, and another with perceptions of slowing social mobility.
Non-Constituency MP Leong Mun Wai of the Progress Singapore Party (PSP) said that the "decline of the middle class" had given rise to the "two Singapores" described by Mr Singh, and that this group of Singaporeans was "overtaxed" relative to their incomes.
Mr Leong then argued that short-term handouts like the Cost-of-Living special payment would "breed dependency". He asserted that the Government had billions of dollars in excess fiscal resources each year, which it should use on "long-term programmes" to make the middle class more resilient.
MPs including Xie Yao Quan (PAP-Jurong), Nadia Samdin (PAP-Ang Mo Kio) and Hany Soh (PAP-Marsiling-Yew Tee) also drew attention to the “sandwiched” middle class facing cost-of-living pressures.
“There are some young professionals who say, half in jest: ‘Work hard so you have enough money to actually buy a flat, but don’t work so hard so that you earn so much and you might bust the HDB income ceiling,’” said Ms Nadia.
Such narratives may not apply to the majority of the population but can lead to a “disheartened and disgruntled” middle class, she said.
Both Mr Singh and Mr Leong also took issue with increases to the Central Provident Fund (CPF) Housing Grant, targeted at first-time home buyers, which they said could in fact cause home prices to rise in order to match the grants.
Ms Soh said that the Housing Board grants do not defray the issue of many young couples opting out of resale flats due to the cash over valuation (COV) component, which could come up to S$30,000 to S$50,000.
The COV amount cannot be covered by a housing loan or CPF and must be paid for in cash, which young couples with limited savings are unable to afford, she pointed out.
Listen: Stuck in the middle? How to manage your money better:
Several MPs are urging the government to reconsider proposed changes to the Working Mother's Child Relief scheme. They argue that the majority of working mothers would lose out if the tax relief scheme is switched from being pegged to a percentage of their income, to being a fixed sum. Cherie Lok has more.
WORKING MOTHERS UNDER SCRUTINY
At least five MPs raised concerns about the Working Mothers’ Child Relief, which will change from a percentage of earned income to a fixed sum from 2025.
They flagged that while the move will benefit lower- to middle-income mothers, the majority of working mothers – those who earn more than S$54,000 a year – will get less tax relief.
Mr Louis Chua (WP-Sengkang) said that by his calculations, 80 per cent of mothers will either be unaffected or worse off. The other group who would be better off are those earning between S$2,610 and S$3,810 a month, while unwed single mothers also do not qualify, he noted.
Instead, he proposed a “motherhood tax rebate” for working mothers earning below a certain income.
Ms Jessica Tan (PAP-East Coast) also suggested a hybrid approach where mothers who earn less than S$54,000 a year can receive the new fixed amount, while those who earn more continue to receive a percentage of their earned income. This is because the amount of personal income tax relief an individual can claim is capped at S$80,000, she said.
Ms Soh similarly suggested that the Government offer both the percentage of earned income and fixed quantum, and give working mothers the higher of the two.
She also asked if there were plans to make the sharing of maternity and paternity leave between parents more flexible, to accommodate different family situations.
Mr Chua questioned if fathers will feel comfortable taking the additional two weeks of Government-paid paternity leave, since only more than half of fathers take the current two weeks.
In a similar vein, Mr Darryl David (PAP-Ang Mo Kio) proposed that parents get at least three days of childcare leave every year until their children turn 18. At the moment, parents get six days of paid childcare leave until their child turns seven.
Meanwhile, PAP’s Mr Xie suggested that parents get a “Child Development Bonus” in cash annually for every child they have, which will go beyond the Baby Bonus cash gift and contributions to their children’s Child Development Account (CDA).
Mr Zhulkarnain Abdul Rahim (PAP-Chua Chu Kang) also suggested allowing parents to draw on CDAs for essential items like infant formula or diapers from authorised retailers.
Ms Tin Pei Ling (PAP-MacPherson) called on the Government to increase the number of childcare places and train more teachers for children with special needs.
WORRIES ABOUT CPF CONTRIBUTIONS
MPs Liang Eng Hwa (PAP-Bukit Panjang) and Jessica Tan (PAP-East Coast) noted that the raising of the CPF monthly income ceiling from S$6,000 to S$8,000 by 2026 will reduce the take-home pay of middle-income earners. Mr Liang asked if the Government could review the implementation timing.
Ms Tan added: “My residents did share that while employees do benefit in growing their retirement savings, in a time of increasing inflation, we must recognise that this results in less cash for their monthly spending.”
WP's Mr Chua asked if the CPF annual income ceiling could be raised in tandem with the monthly income ceiling, in order to benefit more workers.
Mr Singh and Mr Saktiandi Supaat (PAP-Toa Payoh) proposed that along with raising the CPF monthly salary ceiling, the Government could allocate a higher proportion of funds to CPF members’ Special Accounts – which are meant for retirement needs – instead of Ordinary and Medisave accounts.
This would better serve the retirement needs of Singaporeans, said Mr Singh, while Mr Saktiandi noted that it would avoid increasing the financial burden on both employers and employees.
Mr Saktiandi asked if the Government will revise interest rates for CPF funds since the monthly salary ceiling rose in tandem with inflation.
Mr Liang also spoke about the Platform Worker CPF Transition Support, which aims to help lower-income platform workers as they make increased CPF contributions.
He said that those in his constituency have been worried about how their livelihoods would be affected, and appealed for the Government to dedicate resources to them for re-employment or reskilling.
PSP’s Mr Leong said the higher ceiling would exacerbate Singaporeans’ “disadvantaged position” relative to Employment Pass holders, because of the CPF contributions employers must make, and rehashed his call for a S$1,200 monthly levy on Employment Pass holders.
“CONFUSING” LANDSCAPE FOR JOBS-SKILLS MATCHING
MPs welcomed the Jobs-Skills Integrators, which will be piloted in the precision engineering, retail and wholesale trade sectors as intermediaries to optimise training and job placement. Mr Singh asked how the effectiveness of the pilot would be determined, and for the Government to flesh out its fiscal outlay for the scheme.
He and MP Cheryl Chan (PAP-East Coast) also asked for an assessment of the Industry Transformation Maps, first launched in 2016.
Mr Sharael Taha (PAP-Pasir Ris-Punggol) said that businesses and workers trying to apply the Industry Transformation Maps on the ground were “overwhelmed” and that the training landscape was “confusing”. He expressed hope that the Jobs-Skills Integrators would help to simplify and execute these efforts rather than add more programmes.
MPs such as Ms Foo Mee Har (PAP-West Coast) further urged small- and medium-sized enterprises (SMEs) to leverage the new Enterprise Innovation Scheme, which will enhance tax deductions for innovation activities.
Ms Foo told the House that for employers, especially SMEs, the Budget measures such as the doubling of paternity leave “is like adding fuel to the fire” when they had not fully digested earlier moves like the increase in CPF contribution rates for older workers.
“Unfortunately, there is no silver bullet for the longstanding manpower woes confronting businesses,” she added.
“Employers must accept that the tight labour market is here to stay. They must embrace this new normal where the balance of power has shifted from employers to employees.”
Mr Chua from the WP touched on flexible work arrangements. He said that if legislation is not tabled on the matter soon, the “hard-earned gains” made during the COVID-19 pandemic might soon be permanently lost, with many already back to working from the office.
Mr Sharael also said that society’s approach to flexible work arrangements was key to unlocking job opportunities for seniors, people with disabilities, caregivers and part-time workers.