Budget 101: What is the Budget and why is it important to Singaporeans?

SINGAPORE — The 2022 budget statement will be delivered by Finance Minister Lawrence Wong in Parliament on Feb 18 at 3.30pm.

It will address concerns over “more immediate issues” like the cost of living and provide support for sectors facing difficulties due to Covid-19, Mr Wong said last week.

For Singaporeans who may not be familiar with the Budget and its process, it may be difficult to gain a full understanding of it.

So what exactly is the Budget and why is it important to Singaporeans? TODAY spoke to several economists to find out more.

WHAT IS THE BUDGET?

Economist Song Seng Wun from CIMB bank gave the analogy of families planning their household expenditure by considering the amount of income they have and what they need to spend on.

“That’s basically the equivalent at the national level in terms of the Singapore Government, how it projects to spend for the year to ensure that businesses, households and the broader economy continue to operate in the most efficient manner,” he said.

The Budget, which is planned annually, includes the revised government revenue and expenditure projections for the current financial year, as well as the planned government revenue and expenditure for the upcoming financial year.

Government revenue include:

• Taxes, which make up the biggest component (87 per cent) of revenue. This includes Goods and Services Tax (GST), personal income tax and corporate tax
• Returns from investments of Singapore’s reserves, such as dividends and other assets
• Fees and charges, such as Certificate of Entitlement (COE) premiums

Government expenditure include:

• Operating expenditure, which includes spending on the country’s manpower, as well as grants to organisations and statutory boards
• Development expenditure, which are spendings on government development projects or grants given to statutory boards and organizations such as universities for development projects

The Budget is prepared for each financial year, which lasts from April 1 to March 31 the following year, and preparations usually start a year before.

THE BUDGET PROCESS

• While preparing the budget statement, the Ministry of Finance (MOF) gathers feedback from other ministries and agencies to find out the effectiveness of existing policies
• It also gathers feedback from the public via online and offline channels. These include the Singapore Budget website and Reach social media channels
• After the Government has approved the Budget, the Minister for Finance delivers the Budget statement in Parliament, usually in February
• In the week after, Parliament reconvenes for the Budget debate, where Members of Parliament address various aspects of the latest Budget
• The Finance Minister then delivers a round-up speech, clarifying members’ queries and summarising the key points of the budget
• Parliament sits as the Committee of Supply to examine each ministry’s plans. This is when the various ministries can go into greater detail regarding the Budget
• After the Committee of Supply has voted on all ministries’ estimates, it reports its decision to Parliament, which will then debate and vote on the Supply Bill, which is a law
• The Supply Bill is then sent to the President for assent and, if assented, enacted into a law called the Supply Act. This Act controls the Government’s spending in the coming financial year

WHY IS THE BUDGET IMPORTANT TO SINGAPOREANS?

The Budget will directly affect the daily lives of Singaporeans as it concerns matters such as the cost of living, the availability of jobs and what subsides people are eligible for.

But economists urge Singaporeans to adopt a broader perspective and to be more aware of the Budget’s long-term effects.

DBS senior economist Irvin Seah said: “The impact of the Budget is not just getting a bunch of one-off goodies from the Government. It actually has a long-lasting impact on the future of Singapore as well as our children.

“For example, it could have an impact on the education of our children. There could be measures that affect the amount of subsides we get in public education. This would then affect how much we need to pay for education in the future.”

Mr Song added that it is important to see how the Budget will shape Singapore to stay relevant in the long run.

“It may not matter today or tomorrow. But for those who have children and grandchildren, it matters because this is where future job creations will lie,” he said.

HOW TO UNDERSTAND THE BUDGET?

Ms Selena Ling, head of treasury and research at OCBC bank, said that having a basic understanding of what goes into the government revenue would help Singaporeans understand the reasons for certain measures such as GST hikes.

Mr Song added that being aware of how the rest of the world is faring would provide a deeper understanding of various aspects of the budget.

“We are a small and open economy that depends on trading. So how well we do and how much the Government collects depends very much on how well other farms are doing,” he said.

“We have to see what’s happening in the broader, wider picture outside of Singapore to realise what we can have on our table at home.”