Debated in Parliament on 4 Apr 2022.
Minister for Finance.
Mr Speaker, Sir, the Minister for Trade and Industry last updated the House on the economic impact of the conflict in Ukraine during the Budget Debate at the end of February. Today, I will give an update on the macroeconomic situation and explain the Government's approach on inflation, fuel duties, and support for households.
The Second Minister for Trade and Industry will then speak on energy costs, supply chains and support for businesses, as well as the Committee Against Profiteering. Together, our Ministerial Statements will answer Question Nos 1 to 15 and also Question Nos 14 to 16 and 29 to 30 for Written Answer in today's Order Paper.
Several Members, namely, Mr Christopher de Souza, Dr Wan Rizal1, Mr Liang Eng Hwa2, Mr Gerald Giam, Mr Darryl David3 and Mr Alex Yam4 have filed Questions for Oral and Written Answers scheduled for future Sittings on these issues. As today's Ministerial Statements will address these questions, I would invite these Members to seek clarifications on these issues after the Ministerial Statements, if need be. If their questions are sufficiently addressed, it may not be necessary for them to proceed with the Questions for future Sittings.
Sir, the increase in prices we have been experiencing over the last few months is not unique to Singapore. It is happening worldwide. In fact, global prices were already rising last year, and there are a few reasons for this.
Major economies like the US and the Eurozone have pursued expansionary macroeconomic policies and these were to stimulate their economies since the pandemic hit. This contributed to a surge in demand, including for energy, especially after these economies began to ease up on their COVID-19 restrictions.
But supply was unable to catch up with demand. In particular, there were more unexpected gas production outages during this period. The supply constraints were exacerbated by the under-investment in fossil fuel production over the past few years, due in part to the global push for greener sources of power. But these renewable sources of power have not been able to scale up quickly enough.
There have also been continued supply chain pressures due to COVID-19, such as port congestion and freight capacity constraints. These pressures have impacted all industries, some more than others. Furthermore, several major advanced economies face labour tightness, which have driven up labour costs and these have, in turn, passed through to inflation.
All of these factors led to a rise in inflation in the major economies last year. At the start of 2022, there were some initial hopes that global inflationary pressures would ease over the course of the year as the supply situation improved. But with the war in Ukraine, it is now likely that global inflation will be higher for longer. There are several reasons for this.
Global energy supplies will remain tight, given that Russia is one of the world's largest oil and gas exporters. For now, Russian gas is still flowing into Europe. But this may not continue for long. Countries, such as Germany and Austria, which are highly reliant on Russian gas, are already putting in place their first phase of rationing of gas, in anticipation of a disruption of supplies from Russia. The US is releasing a record amount of oil from its emergency reserves and exporting LNG to Europe. But this may not be sufficient to make up for the potential supply loss from Russia. Furthermore, it will take time for any new infrastructure to be built and additional oil and gas production to be brought to market. We must, therefore, expect oil and gas prices to remain high for some time.
The tightness in the energy market will also have downstream impact on other related sectors. For example, many refineries in Germany rely exclusively on piped gas from Russia for their operations. If the Russian gas supply is disrupted, these refineries will have to shut their operations and there will be adverse impact on the downstream production of chemical products, from plastics and fertilisers to fibres and solvents.
Several Members asked about food prices. The war has impacted global food supplies, resulting in higher food prices. Russia and Ukraine are major exporters of agricultural products, such as wheat, corn and barley, as well as fertilisers. In fact, Ukraine is sometimes called the "bread basket of Europe". With the war, food exports from these countries will be significantly impacted. Fertiliser shortages will also reduce crop yields elsewhere, resulting in a smaller harvest in the coming year. As a result, prices of a range of agricultural commodities, not just wheat and corn, are now at cyclical highs, pointing to potentially tight stocks this year.
Besides the two key areas of energy and food, production is affected in other areas too. For example, Russia is a significant exporter of important industrial metals like palladium, used in catalytic converters for cars, and nickel, used in steel and batteries. About half the world's neon, which is used in the chip production process, is produced in Ukraine.
In short, the war has contributed to a further spike in inflation experienced around the world. Inflation in Germany and America has already risen to nearly 8%, the highest in 40 years. No one can tell how the war in Ukraine will unfold. We all hope that attempts to de-escalate are successful, and a diplomatic solution can be found at the negotiating table. But we must be prepared for a prolonged conflict, or even further escalation, which will cause further supply disruptions and additional inflationary pressures.
Besides the war, there are other factors contributing to rising prices. The global economy is continuing to grapple with supply chain issues due to COVID-19. The recent lockdowns in Chinese cities like Shenzhen and Shanghai have worsened strains in shipping and supply chains. If there are continued periodic lockdowns in China or other major economies in the coming months, for example, to prevent the spread of a new and more dangerous variant, then we can expect further supply disruptions.
Furthermore, both the pandemic-related disruptions and the Russian invasion of Ukraine have prompted companies to take supply chain risks more seriously. There is renewed momentum to re-shore production, either back to the home countries of multinational corporations, or to more locations across different markets, so as to avoid single points of failure. In other words, the highly efficient, just-in-time global supply chain network is being reconfigured to account for once-unimaginable tail risks. This can help make supply chains more resilient but will add to production and transport costs.
In the longer term, global warming and increased adverse weather events could affect agricultural productivity and reduce food production, putting upward pressure on prices. Over time, the global economy will also have to internalise the cost of carbon in our overall consumption, as part of the green transition.
So, amidst this backdrop, the central banks of several major economies have shifted their position to take a stronger stance against inflation. The US Federal Reserve and the Bank of England have raised interest rates to tackle inflation, with the European Central Bank expected to follow suit.
But central banks in these major economies also face a very difficult dilemma. If they were to raise interest rates too sharply to tackle inflation, they will slow down economic activity or even trigger a recession. On the other hand, if they do not raise interest rates sufficiently, they will find it hard to anchor longer-term inflation expectations. They will then risk prices drifting persistently higher and becoming harder to control over time.
This is why some economists have drawn analogies between the current situation and what happened in the 1970s. At that time, there was also excess demand, as the US had pursued expansionary policies to push for economic and employment growth. When the oil crisis hit in 1973, the effect was immediate and dire. Oil prices shot up and inflation rose sharply. It took the US Federal Reserve many years to bring inflation under control and this was eventually achieved only at great cost to the economy.
History does not repeat itself but, as the saying goes, it often rhymes. No doubt, the global economy today is very different from what it was in the 1970s and central banks and market institutions have also evolved greatly in sophistication since then. But the downside risks of higher inflation and slower growth for the global economy have increased significantly. If these downside risks were to materialise, they will have a major impact on Singapore as a small and open economy.
We had earlier anticipated some of these risks and had taken prompt actions through both monetary and fiscal policies. In particular, MAS had pre-emptively raised the rate of appreciation of its exchange rate policy band in October last year and also in an off-cycle move in January this year, to help dampen inflationary pressures. Monetary policy will continue to do its part to ensure medium-term price stability. MAS is watching closely the impact of geopolitical and pandemic-related shocks on the Singapore economy and inflation and will be putting out its monetary policy statement, as scheduled, later this month. Where fiscal policy is concerned, we had taken into account the risks in the global economy and rolled out an expansionary Budget this year. We had also implemented very comprehensive and substantial support packages to help households and businesses cope with higher prices.
Several Members asked whether the Government will consider enhancing the support measures announced in the Budget. The measures in the Budget have just been announced and will be implemented soon. We will need time to allow these measures to take effect and feed through the economy before we monitor their impact, assess the overall situation and then consider what additional steps we might want to take.
Nevertheless, I understand the concerns that many households and businesses have about the current situation and have decided to take the following immediate actions.
First, where possible, I will bring forward the implementation of our Budget measures. In particular, the $100 CDC Vouchers for every Singaporean household will be disbursed by the middle of next month. This is on top of the $100 disbursed four months ago in December last year and will help Singaporeans with their daily expenses.
The Budget also included rebates for Service and Conservancy Charges (S&CC) and utility bills. We will disburse the first tranche of S&CC rebates and U-Save rebates to eligible households this month. This will address a key cost of living component which several Members have asked about. To illustrate, households living in 4-room HDB flats will receive $150 in U-Save rebates this month, and that is equivalent to about a full month's worth of their utility bills, on average. That is the first tranche of the rebates. But the rest of the U-Save and S&CC rebates will be disbursed in the coming quarters – in July and October this year, and in January next year. So, for the whole of Financial Year (FY) 2022, households living in 4-room flats, to give an illustration, will receive about four months of rebates on their utility bills, and that is even accounting for the higher electricity prices, and two-and-a-half months of rebates on their S&CC.
We also have other forms of help for households, including top-ups to the Child Development Account, Edusave Account, or Post-Secondary Education Account of every Singaporean child, as well as the GST Voucher in terms of cash and MediSave top-ups. We will continue to ensure that these are disbursed to Singaporeans in a timely manner. And, Mr Speaker, with your permission, I would like to distribute a handout, which will provide a schedule of the various support measures that households can expect in FY2022.
Please proceed. [A copy of the handout was distributed to hon Members.]
For businesses, I will bring forward the disbursement of the Small Business Recovery Grant. This provides up to $10,000 for SMEs most affected by COVID-19 restrictions over the past year. Most eligible businesses will be able to receive the grant by June. The recent easing up of safe management measures (SMMs) should also provide some additional revenue support for local businesses, especially in the retail and F&B sectors.
Second, we will provide more help for lower-income households, which will be more impacted during this period of higher prices.
In particular, the Social Service Offices, or SSOs, will provide a minimum duration of six months' support for all new ComCare Short- to Medium-Term Assistance (SMTA) clients who apply between April and September this year; so, a minimum duration of six months' support for ComCare SMTA. Households which are already on ComCare SMTA can also have their assistance extended for at least another three months if they require further assistance. SSOs will continue to exercise flexibility to provide those in need with financial assistance and support. This includes providing ComCare recipients with more cash assistance during this period to cope with inflationary pressures.
The COVID-19 Recovery Grant is also in place until the end of this year and this will help lower- to middle-income households experiencing job losses or sustained income losses.
And families who need help can also approach their Community Centres, or CCs, and the Self-Help Groups. As announced at Budget 2022, I will top up the CCC ComCare Fund by $5 million over five years and provide a total of $12 million over four years to our Self-Help Groups. These schemes complement our national schemes, bringing more help closer to residents.
Third, we will do more to help the lower-income groups with their public transport fares. We had earlier disbursed Public Transport Vouchers, or PTVs, to every household that received a PTV in the last exercise and that includes over 30,000 ComCare beneficiaries. We will do another round of disbursements this month for these ComCare recipients. So, they will receive $60 of PTVs, which will roughly cover the additional fares paid by a family of four this year arising from the fare increase last December.
Besides these ComCare recipients, PTVs are also available to all households whose monthly income per member does not exceed $1,600. Applications for PTVs are open from now to 31 October this year. Eligible households which had already received the first voucher and who need a second voucher can also apply again.
Lower-income persons with disabilities who require point-to-point services to commute can also apply for the Taxi Subsidy Scheme, which covers up to 80% of the taxi fares that they pay going to school, work or training. This cushions them from the impact of recent fare surcharges introduced by taxi and ride-hailing app operators.
Next, let me respond to the queries raised by several Members on fuel duties and road tax rebates. We collect fuel duties and road taxes for revenue and also to price the negative externalities of vehicle transport, such as the impact on public health and the environment.
Fuel duties collected averaged $920 million a year over the last five years. The revenue from these duties and taxes adds to the pool of resources available for various programmes and subsidies that directly benefit Singaporeans. These include spending on public transport, for which we provide significant capital investments, as well as operating subsidies to ensure an affordable and world-class public transport system.
Given the recent increase in pump prices, I can understand why some Members have asked to reduce or suspend fuel duties, or to provide road tax rebates. But doing so effectively amounts to a subsidy on private transport and will have counter-productive effects. Let me explain.
Fewer than four in 10 households in Singapore own cars and, amongst the lowest quintile, only about one in 10 do. Four in 10 is the overall but, if you look at the lowest quintile, the bottom 20% of households by income, only one in 10 owns cars. Such subsidies on private transport would, therefore, benefit a relatively small but generally better-off group.
Cutting fuel duties also means that some of the subsidies will flow back, in part, to producers and suppliers themselves, not just to consumers, as the pump price may not fall as much as the reduction in duty.
More importantly, such subsidies will reduce the incentive to switch to more energy-efficient modes of transport, which is a critical element in our plans for sustainable living.
I recognise that there are several groups like taxi and private hire car drivers and delivery riders, who are affected by the increases in petrol and diesel prices. Various taxi and private hire car operators have implemented temporary increases in fares to help cushion the higher fuel prices for drivers and to have consumers share the burden. They also have tie-ups with petrol companies to offer fuel at discounted prices to help drivers and riders manage higher fuel costs. And as I mentioned earlier, those whose incomes are impacted and are in need of financial assistance can approach the SSOs, CCs or self-help groups for more help.
Overall, the better way to help Singaporeans cope with the rise in petrol prices, as with inflation in general, is to provide them with the support measures that we have catered for in the Budget. Through these measures, we are extending concrete tangible help directly to Singaporeans to cope with their different areas of needs, including their utility bills, children's education and daily essentials, and we are providing more targeted help for the lower-income groups.
Sir, I have outlined some specific actions we will be taking to help Singaporeans cope with higher prices. We will continue to monitor the external situation and the risks for our economy closely – risks, both in terms of growth and inflation. And where inflation is concerned, we are monitoring this closely, not just the headline figure but also the impact of inflation on different income groups and even the issue of shrinkflation, which Ms He Ting Ru asked about. As the Government has assured this House previously, if the situation worsens, we will not hesitate to take further actions to protect jobs and to help households and businesses deal with the increased costs.
Sir, we are now dealing with a war-induced increase in prices, especially in electricity and fuel. But even without the war, we would, eventually, have to adjust to a secular increase in energy prices, as we seek to decarbonise our economy. Likewise, on the manpower front, we will continue to face a tight labour market, given our rapidly-ageing population.
In short, labour and carbon are permanent – not temporary – constraints for our economy. Therefore, we cannot offset these costs perpetually. Instead, a better approach, a more viable approach is to redouble our economic restructuring and transformation efforts, to become more innovative, productive and energy-efficient. These efforts will help our economy become more resilient to external shocks. And this is also how we sustain continued income growth for Singaporeans, with earnings rising faster than inflation, so that we can retain and grow our purchasing power and achieve higher standards of living.
Sometimes, it does take a crisis to jolt all of us into action because, for many years, to illustrate, the Government had highlighted the importance of digitalisation. But take-up rates for digitalisation schemes were uneven. Then, when COVID-19 struck, businesses had to adjust quickly and, within two years, we managed to achieve much more in our digitalisation efforts than all the combined efforts over the past decade.
In the same way, I hope that the current increase in business costs and energy prices will motivate firms to change their mindsets, processes and practices. The Government has put in place many schemes in this Budget and in previous Budgets, to help companies improve their productivity and energy efficiency. And Minister Tan See Leng will elaborate further on them later. I urge businesses to make full use of this support and to accelerate their restructuring and transformation efforts. Doing so will strengthen their abilities to withstand shocks and position them well for the future.
Mr Speaker, this is not the first time we have had to deal with such challenging external economic conditions. During the oil crises of the 1970s, Singapore's inflation rate peaked as high as 30% year-on-year in the first half of 1974 and around 10% in the second quarter of 1980. These events underscored our vulnerabilities to inflation, as a price-taking small and open economy. And, in response, in the early 1980s, we developed a unique exchange rate-centred monetary policy that helped tame imported inflation.
The Labour Movement played a vital role in stabilising prices with the establishment of NTUC Welcome, which evolved to become the NTUC FairPrice of today. By buying essentials like rice in bulk and passing on the savings to consumers, NTUC not only tackled profiteering among wholesalers, but also helped workers and Singaporeans beat inflation. NTUC FairPrice continues to help mitigate cost of living pressures through various initiatives and discount schemes.
In the 2008-2009 Global Financial Crisis, we acted quickly to save jobs amidst a global recession, implementing the Jobs Credit Scheme, the precursor to our more recent Jobs Support Scheme. As a result of this and other interventions, our economy rebounded swiftly in 2010.
Of course, all of these crises paled in comparison to the COVID-19 pandemic and also our worst recession, since Independence, in 2020. Our swift and decisive action to protect lives and livelihoods enabled resident employment and incomes to quickly recover to pre-COVID-19 levels by 2021 while keeping COVID-19 deaths low.
Now, before we have had the chance to see through the pandemic, we are faced with yet another economic challenge. After many years of relative price stability, the recent surge of inflation has, understandably, come as a shock to many. But when viewed against the global context and our own experience, I hope we can better understand the causes of higher prices and what we can do to manage this together.
We must not let this become a blame game of Government versus people, of sellers versus buyers, of hawkers versus consumers. Or worse, think that if Singapore were to lie low and remain silent on the war in Ukraine, we could somehow all enjoy lower pump prices today.
What we are experiencing today in Singapore is the result of external forces that impact the entire global economy. We cannot do very much to change this. But what we can do is to continue to keep faith with one another, as we have done over the last two years – look out for one another, help those in need and never waver from the conviction that we will always have one another's backs.
Mr Speaker, let me end by assuring all Singaporeans once again: help from Budget 2022 is coming. If the situation worsens and more support is needed, the Government stands ready to do so. There are dark clouds over the horizon. But we will get through this together, as we have always done, as one united people. [Applause.]
Minister Tan See Leng will be making a related Ministerial Statement. I will allow Members to raise points of clarifications on both Statements after this. Minister Tan.
Mr Speaker, thank you. Minister Lawrence Wong has given Members an overview of the macroeconomic environment, the outlook for inflation and the support for households.
Even as we work to manage the immediate cost pressures that businesses and households are facing, it is equally important that we strengthen our economic resilience and prepare ourselves for a possibly protracted uncertain operating environment.
Let me elaborate on the external developments that have led to higher energy costs and supply chain disruptions, as well as our immediate and medium-term strategies to enhance the security of our key supplies and strengthen our resilience against external price fluctuations. I will also address Members' questions on support for businesses and on profiteering.
Domestically, around 95% of our electricity is generated from imported natural gas. Our electricity generation companies (gencos), generally, rely on long-term Piped Natural Gas (PNG) and Liquefied Natural Gas (LNG) contracts to meet their needs. They use spot LNG, on an opportunistic basis, to supplement their long-term contracts. By and large, this has allowed us to keep electricity prices relatively stable and mitigate the impact of global price shocks. However, we cannot fully insulate ourselves from the volatilities in the global energy market.
Since September last year, a confluence of factors has caused the prices of oil and natural gas to spike, and this has spilled over into our domestic energy market.
Increased oil and gas consumption as major economies around the world emerged from the pandemic, seasonally-high energy consumption during the winter months in the northern hemisphere and a series of unexpected gas production outages led to a supply-demand mismatch in global energy markets.
Closer to home, upstream production issues in Indonesia's West Natuna gas field and gas pressure issues from South Sumatra in the fourth quarter of 2021 caused disruptions to our PNG supplies. As a result, some gencos had to purchase more spot LNG at elevated global gas prices to make up for the drop in PNG supplies.
Although some of the demand pressures have abated as winter in the northern hemisphere comes to an end and upstream gas production issues in Indonesian gas fields have been resolved, the gas supply situation continues to remain tight and this is exacerbated and made protracted by the conflict in Ukraine.
As I have shared with the House previously, MTI and EMA have put in place measures to secure our electricity supply and maintain the orderly functioning of the wider energy sector.
Since October last year, we have established a Standby LNG Facility (SLF), which gencos can draw from to generate electricity in the event of disruptions to their natural gas supplies. We also put in place requirements for gencos to contract sufficient fuel to meet their commitment to customers' demands and needs.
These measures bolster our gencos' existing stockpile and they provide additional layers of fuel security to cope with the short-term shocks to global gas supply. However, they are costly and will need to be carefully calibrated to manage the cost impact on consumers.
Third, to maintain power system stability and reliability, we modified market rules to allow EMA to direct gencos to generate electricity using gas from the SLF, if there are potential temporary shortages in energy supply.
These measures have ensured that we have sufficient fuel and electricity supply and stabilised the Uniform Singapore Energy Price (USEP). The average USEP for the first quarter of this year has stabilised to around $360 per megawatt hour (MWh), around the cost of electricity production. This is compared to an average of $460 per MWh in the fourth quarter of last year.
Since January 2022, EMA has also been working with electricity retailers and gencos to help large consumers to secure retail contracts.
For example, businesses can secure one-month fixed price plans and retail contracts with significant fixed price components through the Temporary Electricity Contracting Support Scheme (TRECS). So far, there has been sufficient supply under TRECS to meet demand.
EMA has also worked with Sembcorp Power and Keppel Electric to offer long-term fixed price plans for business consumers with an average monthly consumption ranging from four MWh to 50 MWh. These plans range from six months to three years.
EMA's efforts ensure that consumers, especially those affected by exiting retailers, can choose from a range of retail contracts to suit their needs. Such longer-term contracts also provide gencos with more certainty of demand, which allow them to contract for the gas that is needed to serve consumers.
Mr Speaker, energy powers our economy and our society. Given the uncertain global energy situation, EMA will be extending all measures, including TRECS, to end June 2022. This will give businesses, especially SMEs, a bit more time to respond to the evolving global energy situation. EMA will continue to monitor the situation and consider extending the measures further or introduce new measures, if necessary.
But as consumers, we must also be prepared mentally to face higher electricity bills over time, especially if the price of oil and gas remains elevated. Singapore is not an energy producer. The Government can and will help to smooth out extreme fluctuations in energy prices, but, over the longer-term, electricity prices will have to reflect the costs of procurement and production.
It is not tenable for the Government to subsidise electricity consumption in Singapore, in order to keep domestic electricity prices lower than the global prices which Singapore must pay for energy in the first place.
Last week, SP Group announced that it would be raising regulated tariff rates for its consumers by approximately 10%. Those on retail contracts have already started to see higher electricity prices when renewing their contracts. These higher electricity prices reflect the increasing costs of electricity production in this challenging climate and may continue to increase, depending on the direction of fuel price movements.
The protracted energy crunch has highlighted the need to make our power system more resilient and less susceptible to fuel supply shocks. Since 2014, we have sought to diversify our fuel sources to safeguard our energy security by building an LNG terminal. This allows us to tap on gas sources further afield. The LNG terminal has sufficient capacity to meet all our natural gas needs should PNG be unavailable.
In the longer term, we will continue to diversify our energy sources. We will quadruple our solar deployment by 2030, to generate at least two gigawatt-peak of electricity by 2030. The Government has taken the lead in accelerating rooftop solar deployment. One example is the SolarNova programme, which aggregates demand for solar systems across the public sector. We will continue to explore ways to maximise Singapore's solar potential.
We also intend to import up to four gigawatt of low-carbon electricity by 2035. Besides decarbonising the power sector, this will also reduce our reliance on natural gas.
Beyond this, we will continue to explore other low-carbon alternatives, such as hydrogen, geothermal and, as what Minister of State Alvin Tan alluded to earlier on, even nuclear energy, which may have the potential to improve our energy security and our energy resilience.
These measures will take time to bear fruit, but we will have a more secure and resilient power system over time.
The Minister for Finance has touched on the Government's efforts to help households defray utilities costs. Each of us, as fellow Singaporeans, can also do our part. I urge all of us to conserve energy, just like how we conserve water.
Small lifestyle adjustments, such as switching off appliances when they are not in use, raising the temperatures in an air-conditioned environment by one to two degrees and using the fan instead of air-conditioning where possible, can go a long way in maintaining a sustainable, secure and resilient energy future for all of us.
Let me now address Members' concerns about the security of our supplies of key commodities, such as food and fuel, as well as rising costs.
As the Minister for Finance mentioned, the Government is closely monitoring food prices and will continue to ensure that basic food necessities remain accessible and affordable for everyone. We are also keeping a close watch on global supply chains and our stock levels of essential food items to ensure that Singapore continues to have access to adequate supplies. Thankfully, our supply of essential food products has not been significantly affected by the Ukraine-Russia conflict and we have not had to draw on our food stockpiles. But we will continue to diversify our import sources. We will not rest on our laurels. We will ramp up our stockpiles and supplies from alternative sources, where needed, to ensure that we have continued access to basic food necessities.
I would also like to assure the House that we have put in place measures to ensure that we have adequate fuel supplies, including petroleum. Members will appreciate that it would not be appropriate for me to share the specifics of this plan for security reasons.
Mr Speaker, many businesses are facing cost pressures and had to raise the prices of their goods and services as a result. For example, pump operators have raised petrol and diesel prices to reflect the rise in crude oil prices over the past months. Some landlords have also passed on increased utility costs to their tenants, including those in food courts and coffee shops.
The Code of Conduct for Leasing of Retail Premises, which was issued by the Fair Tenancy Industry Committee (FTIC) last year, sets out guidelines on how landlords can do so.
Often, these increases are understandable as businesses are also facing pressure on their bottom-lines. But, there are also many other businesses that have gone out of their way to hold prices steady and offer discounts to consumers.
For example, NTUC FairPrice has rolled out initiatives to help consumers stretch their dollar, such as by providing a 5% discount on 100 key essential items every Friday. These comprise household staples, such as rice, oil, eggs, milk and vegetables, and they should help to mitigate some of the cost pressures felt by households.
Giant has also committed to keeping the prices of essential items stable and recently expanded coverage to include close to 150 essential products.
I thank these companies for doing so.
Some Members have also expressed concern about profiteering behaviour. I would like to assure the House that the Government keeps a close watch on the prices of essential goods and services and will not hesitate to investigate anti-competitive behaviour.
The Competition and Consumer Commission of Singapore (CCCS) keeps a close watch on the movements in pump prices. So far, movements in pump prices largely mirror the movements in crude oil prices, though they have increased to a smaller extent. As of end-March 2022, crude oil prices were about 40% higher than in January 2022, while the price of petrol and diesel were, on average, about 15% and 30% higher respectively.
We have no evidence to suggest that there is collusion amongst the petrol retailers. CCCS will take firm enforcement action, including imposing financial penalties, on infringing firms, if there is any evidence of anti-competitive behaviour, such as coordinated price increases, and this applies across the board to any industry.
To deter unreasonable pricing, we will also support consumers in being well-informed on alternative options.
The Price Kaki application and the Fuel Kaki website developed by the Consumers Association of Singapore (CASE) allow consumers to easily compare the effective prices of groceries, hawker food items and retail pump prices across different retailers. CASE will also enhance the Price Kaki application to enable users to compare the prices of similar items by their weight and volume. This will help consumers make better purchasing decisions where retailers choose to maintain prices but reduce the quantity of products.
The Committee Against Profiteering (CAP) has also been reconvened ahead of the GST increase. The role of CAP is to investigate feedback on unjustified increases in the prices of essential products and services using the GST increase as an excuse.
CAP Chairman Minister of State Low Yen Ling has shared that the work of the Committee is more complex due to the current inflationary climate. Nevertheless, CAP will review and evaluate all the feedback it receives and engage businesses where necessary. CAP may name and shame businesses that use the GST increase as an excuse to raise prices.
Mr Speaker, Sir, I can understand why Members are concerned about anti-competitive behaviour. Such behaviour artificially inflates costs to households and businesses. We will work closely with our industry partners to diversify our supply chains, investigate anti-competitive behaviour, encourage price transparency and enable free market competition to function as it should. Ultimately, this is the best way to safeguard all of our consumer interests.
Members have asked what the Government can do to help businesses and households cope with the rising costs. I would like to assure Members that we are committed to partnering Singaporeans to ride through this difficult period. At the same time, we must also be prepared for longer-term trends that may put further upward pressure on prices.
The Minister for Finance has touched on some of these trends in his speech. Allow me to elaborate.
First, we will work with a range of stakeholders to carefully manage the various cost drivers faced in the near term. MOF has touched on measures to help households manage the higher costs of living. The Government has also set aside considerable resources to help businesses, especially SMEs, cope with higher costs.
The Small Business Recovery Grant provides $1,000 per local employee and up to $10,000 per firm. The Grant will help eligible firms in sectors most badly affected by COVID-19 restrictions and is also available to SFA-licensed operators and stallholders in markets, hawker centres, coffee shops and food courts. All in all, the Grant will provide $175 million of support to small businesses.
IRAS will notify businesses of their eligibility and disburse the grant from June this year.
The $500 million Jobs and Business Support Package, including the extended Jobs Growth Incentive (JGI), will support firms with their investments in workers.
The Progressive Wage Credit Scheme will also support businesses with their manpower costs as they uplift the wages of our low-wage workers. The Minister for Finance announced a $2 billion injection into this scheme at Budget this year.
The extension of enhanced enterprise loan schemes will facilitate SMEs’ continued access to financing and ease their cashflow. These measures were announced at Budget just last month and it reflects our commitment to supporting our businesses through this difficult period. We are closely monitoring the situation and will provide more support for affected sectors, if needed.
As electricity prices rise, being energy-efficient will become increasingly important to managing business costs. We have already put in place several measures to help businesses improve their energy efficiency.
For example, NEA's Energy Efficiency Fund provides grants for manufacturing companies to adopt energy-efficient technologies; BCA's Green Mark Incentive Scheme provides grants for building owners to improve the energy performance of existing buildings; and ESG's Enterprise Sustainability Programme supports local enterprises to optimise energy and carbon use.
We understand that more businesses will be looking at ways to improve their energy efficiency and make their operations greener and more sustainable during this period. The Government will do its part to assist companies in this transition.
We are studying various options, such as expanding the range of supportable solutions or making it easier for businesses to apply for existing grants.
Fuel intensive sectors, such as transport and logistics, have also been hard hit by volatile petrol prices. We encourage our firms to double down on operating more efficiently and sustainably. This includes taking part in industry initiatives to share jobs to optimise asset utilisation, to use fleet management systems to track and monitor fuel consumption. By being more resource-efficient, businesses can better deal with unexpected, exogenous shocks that come our way. It goes a long way to improving our resilience and our energy security.
Second, we will continue to work with industries and firms to transform and improve their overall productivity, so as to sustain real wage growth for Singaporeans.
In the Budget this year, we announced that we are setting aside around $600 million over the next four years under the Productivity Solutions Grant (PSG). PSG supports companies as they adopt various solutions to improve their productivity.
We have also expanded the coverage of the SkillsFuture Enterprise Credit (SFEC) to allow more smaller and micro enterprises to benefit.
MOF has also announced a new $70 million grant to be administered by NTUC to support companies with Company Training Committees (CTCs) to implement their transformation plan, redesign jobs and upskill workers for better workforce productivity.
At the Committee of Supply last month, Minister of State Low Yen Ling also announced the Food Services and Retail Business Revitalisation Package which will provide additional support to our food services and retail companies to improve their productivity, build the companies' capabilities to pivot and transform, hire and train more local workers and stay competitive and relevant. I urge all of our firms that there is no better time than now to tap on these resources, adapt, transform and better position themselves for the future.
Finally, we must and we will continue to strengthen our links with the rest of the world. As a small country, we cannot close ourselves off from the rest of the world just to avoid importing inflation or exposing ourselves to the volatilities in the global markets. Staying connected to global markets is essential to helping our businesses grow beyond our borders, attracting investments into Singapore and creating good jobs for Singaporeans.
This is underpinned by our wide network of Free Trade Agreements (FTAs), which create opportunities for our businesses in other regions and provide benefits, such as tariff savings, investment protection, amongst others. We will continue to strengthen regional and international economic integration and help our enterprises, especially the SMEs, utilise and benefit from our network of FTAs.
Sir, as a small and open economy, we are not and will not be able to be fully insulated against global shocks. But, make no mistake, we will continue to safeguard the security of our essential supplies, such as energy and food, and refresh our strategies for a more resilient economy.
Two, even when prices do go up, we will do our best to cushion the impact.
Three, we will closely monitor price movements and will not hesitate to take enforcement action against anti-competitive behaviour.
Fourth, last but not least, we will continue to monitor, watch the situation closely and consider providing further assistance, if needed.
The past two years have, indeed, been challenging for all of us. Many businesses have been looking forward to riding the wave of a strong recovery in the global economy as we emerge from this pandemic.
The Ukraine conflict and global inflationary pressures add considerable volatility and stress to what is an already challenging business environment. But let us not be pessimistic about the future. We will need, together as a nation, to strengthen our defences against external shocks. We will need to continue to pivot, transform our businesses to adapt to the changing global environment and we have done this many times before.
Above all, we will need to work together – the people, businesses and the Government – so that we can weather the headwinds and emerge stronger. [Applause.]
Ms Carrie Tan.
I thank the Ministers for addressing this very important topic. I would just like to understand with regard to the extension of the financial support for short- and medium-term assistance that Minister Lawrence Wong talked about earlier. Since the Government is already prepared to provide this extension of support – and I think we can safely be assured that the lowest income amongst us will be hit by the inflationary pressures and we all understand that beyond the actual pain of having to pay more are the anxiety, frustration and uncertainty that could hurt us more, presenting vulnerabilities for people to exploit in our society – what are the downsides of just making this three-month extension to our lowest-income automatic?
Will the Minister consider making these extensions automatic, so that both the recipients and also our civil servants and SSOs can do away with the administrative burden of having to reapply, renew, find justifications and so on, which could go a long way towards reducing the stresses that people are facing at this very difficult time?
Mr Speaker, we understand the concerns that the lower-income groups face and, as I mentioned just now, we are focused on providing more help to them, particularly during this period when they face the pressures of higher prices. So, we are already going to extend ComCare for a minimum duration of six months for all new ComCare SMTA applicants and extend ComCare SMTA by another three months for those who require further assistance. The question is: why not make that automatic?
The circumstances differ from case-to-case. So, at this stage, rather than making it automatic, for those who need it, they will get it and that is the assurance. And we will streamline the process, make it easy for them to apply, there is no need to re-submit so many different documents all over again, it should not be a burden to them, nor should it create stress. For those who need it, the assurance is that the support will be given to them.
Mr Louis Chua.
Thank you, Mr Speaker. I have got two follow-up questions. One, for Finance Minister Lawrence Wong, is in relation to the Parliamentary Question which I had in terms of the fuel excise duties. Does the $900-plus million that was mentioned relate to all petroleum products or is it only for petrol and diesel which are sold to end-consumers at the pump, since we do have quite a substantial petrochemical industry as a whole?
The second question is, again, in relation to fuel prices, but probably more for Minister Tan See Leng. If we look at Brent crude prices, the last time, it was above US$100 a barrel was sometime in 2012 to 2014. Back then, 95 Petrol was going at about $2.20 to $2.40. But, today, when Brent is above US$100 again, people see that the pump prices are now about $3. So, can the Minister share the structural factors that actually contributed to these higher pump prices, just so that everyone can have a better sense of what are the contributing factors to these 20% to 40% higher pump prices relative to Brent crude prices?
Sir, the $920 million I cited refers to fuel duties collected at the pump for petrol and diesel.
Minister Tan See Leng.
Mr Murali Pillai.
Mr Speaker, Sir, thank you for allowing me to speak. Sir, I have two supplementary questions for the hon Finance Minister.
May I ask the hon Finance Minister why he feels that it is not appropriate to calibrate downwards the petrol tax at this point in time, given the backdrop of the following facts?
First, when the hon Deputy Prime Minister announced the hike in petrol tax in February 2021, he pegged the reasons for increasing it as to promote a green environment, not revenue.
Second, at the time when he announced the tax hike, the Ukraine invasion would not have been foreseeable. But at that point in time, he and the Government officers would have calibrated a certain behaviour pattern in terms of an increase in the fuel price and how much behaviour would have changed from that point onwards. In fact, since the announcement was made, the price was hiked by about 10%.
Third, we all accept that the war drove up the price. In fact, since 24 February 2022, when the invasion happened, to date, the price at the pumps has increased about 5%. So, why could we not calibrate downwards the fuel tax so that we have an optimal behaviour that was planned as at February 2021? That is my first question.
The second question is: if the Minister still does not intend to intervene, then when does he think is a proper time to intervene, having regard to the fact that a number of vehicles are used by fellow Singaporeans for their trades and businesses?
Mr Speaker, I think I had tried to explain very comprehensively why it is not a good idea to reduce fuel duties. Let me try again in light of Mr Murali Pillai's three questions.
We collect fuel duties for both revenue as well as externality reasons. The revenues generated are not small and they are used for a range of very important things, to subsidise many activities: public transport, whole range of things, amongst others.
So, we should think carefully about giving up these sources of revenue, particularly when we are facing considerable revenue challenges already and we had a long discussion in the Budget debate about all the revenue and fiscal challenges we face. That is number one.
Secondly, as I mentioned just now, there are the considerations of who benefits from this. And as I have highlighted, only four in 10 Singaporean households own cars. In fact, four in 10 is the average. For the bottom 20%, one in 10; for the top 20%, it is six in 10. So, in the end, the ones who benefit more are the better-off when you do something like that. So, is that the best use of subsidies?
Thirdly, we will be moving in the wrong direction because fuel duties price in the negative externalities, as we all understand, to society and to the environment. In a way, you can think of them akin, in part, to a carbon tax on vehicles, because we do not apply carbon tax on fuel. Fuel duties are akin, in part, to carbon tax on vehicles. So, we are already moving on carbon tax: to raise carbon tax, to accelerate our green transition and to achieve our net-zero target.
It will not be consistent as we move on that front to, on the other hand, reduce fuel duties. That is why, on balance, we think the better approach is not to intervene in this way. We are saying we will help people who are affected, we will continue to help them. We have been helping and we will continue to monitor the situation and, for those who need more help and if the situation worsens, we will certainly do more. But the better way of helping is not through a reduction in fuel duties. The better way of helping is to directly help those who are impacted through other means and we have these different means to help those who are impacted, be it households or businesses.
Mr Gerald Giam.
Sir, since the Budget Statement, SP Group has announced that electricity tariff for April to June will rise by almost 10%. With this new development, could the Government consider a special additional tranche of U-Save rebates to help Singaporeans cope with this upcoming electricity hike?
Secondly, I understand from the MOF Budget website that the January 2023 U-Save rebate is part of the Assurance Package (AP) to soften the impact of the upcoming GST hike, while the first three tranches of U-Save in 2022 are part of the Household Support Package (HSP). However, now in this handout, the January 2023 U-Save rebate is listed as part of the support for households. So, can I clarify that the January 2023 U-Save rebate is now part of the HSP and not the AP and, if so, should not there be an additional U-Save rebate for the AP?
Lastly, I just want to clarify, the Second Minister, I think, did not answer my question about whether the Committee Against Profiteering (CAP) will address concerns that businesses could use reasons other than the rise in GST as a pretext to make unjustified price increases on essential products and services. Will the Minister please clarify on that?
Mr Speaker, when we sized the AP, we already knew that prices were rising. We had anticipated that. We said it in the speech. If you listen to the Budget speech, we highlighted the concerns that Singaporeans had about higher prices then. Prices had already increased because of the tensions in Ukraine. We knew this was coming. So, we did two things. We put in place a HSP of $560 million that will be disbursed this year and we enhanced the AP. And, in fact, we have sized the AP very generously. More than just a GST offset, it also addresses cost of living.
That is why the AP will delay the impact of GST by at least five years, for the majority of Singaporeans. And for the lower-income, 10 years. Now, for GST-offset purposes, five years is very generous. We could have said "two to three years of offsets are more than enough", but we sized it deliberately, generously, in order to cushion the impact on Singaporeans, especially the lower-income. And that is why when you combine the HSP and AP together, there is considerable support that will be going out very soon.
And that is what we have tried to do in the brochure, to pull it together to show Singaporeans, in one "simple-to-understand" way, all the help that will be coming up in the year ahead. And, to illustrate, for a 4-room household, we are talking about $150 a month of utility rebate this month. Every quarter, there will be another $150, so, $600 altogether. That is enough to cover about four months' worth of their utility bills, even accounting for higher electricity prices. So, that is what we have done.
Now, you say: well, what happens, subsequently, in the next half of the year? What if oil prices go up much higher, electricity prices go up much higher? Well, we will, as I have said, continue to monitor the situation, assess the impact of what we have already announced and will implement, looking at the global situation. And, as I have said just now, if the situation worsens, the Government will do more. But for now, let us roll out and properly implement all that is in the Budget already, which is already giving considerable support to households.
Mr Speaker, can I answer Mr Gerald Giam's points?
Yes, please.
Mr Speaker, the Government's role is to ensure that free market competition can function as it should. We guard against profiteering through a multi-pronged approach that goes beyond CAP, because this includes promoting competition, helping consumers make informed decisions and encouraging a very diversified supply chain. So, earlier on in my speech, I also alluded to the fact that we have got apps, like Price Kaki, Fuel Kaki – and these are developed by CASE – to allow consumers to easily compare the prices of groceries or hawker food items from different sellers.
On top of that, CAP will also work with various agencies and organisations, including the Competition Consumer Commission of Singapore (CCCS), CASE and People's Association (PA), to assess the feedback provided on potential GST profiteering.
CAP will also engage with the relevant businesses, where necessary, to find out the reasons for these price increases. CAP may also make public errant businesses that seek to profiteer on the pretext of GST increase to account for it.
So, today, we have convened CAP ahead of the proposed GST increase to make sure that we are able to pre-empt some of these things.
I think it is also an important point – CAP will, indeed, take a data-driven approach to prioritise its investigations. So, just to put it in perspective, perhaps for the Member's clarity, CCCS monitors market concentration data and shares this data with CAP. Then, CAP will review all feedback provided on unjustified price increases which use GST increase as a cover and investigate. So, I hope that that provides the clarity that is needed to the Member's question.
Mr Xie Yao Quan.
Thank you, Mr Speaker. I appreciate the Finance Minister's considerations for not cutting duties on petrol, chief amongst these considerations being that it subsidises private transport, which the less well-off may consume less of. So, I appreciate the considerations.
But diesel undergirds so much of our supply chain and, indeed, the delivery of essential goods and services. And that is the reason why I filed a question specifically on the possibility of cutting the duty on diesel products. I just hope to seek a clarification from the Finance Minister as to the possibility of this.
Mr Speaker, at the risk of sounding like a broken record, whether it is diesel or petrol, fuel duties, aside from the issue of who benefits, also has an important externality consideration and, for that matter, our diesel duties are already not that high, compared to petrol duties. That is the first point.
The second point, from an externality point of view, we do need to have that duty in place in order to, as we all talked about, go greener, wanting to embrace more energy-efficient modes of transport, a point which everyone supported, incidentally, in this House, not too long ago. And then now, at the first sign of price rising, we are wanting to withdraw so quickly?
So, I think let us have some perspective on seeing the broader considerations and challenges. Yes, we have, indeed, an immediate issue of inflation to tackle. But we also want to press ahead with our net-zero plans and our green transition. These duties are there for that purpose, an important purpose. It does not mean we will not do anything to help the affected groups at all, because we will find other ways to help. And we will continue to monitor the well-being, not just of households, but of the different groups that Members have highlighted: taxi drivers, private hire car drivers, delivery drivers. We will continue to monitor closely their incomes, their well-being and, if need be, as I highlighted just now, we will do more to help them, but we will help them directly, more effectively, rather than through a reduction in duties.
Mr Abdul Samad.
Sir, I have a question to ask the Minister for Trade and Industry regarding the price hike. Can I know who actually decides on a price hike of electricity prices? Is it the Government, EMA or SP Group? I am stating this as a concern because I am also an employee of SP Group. Whenever there is a price hike that is being mentioned, my fellow members and workers at the workplace and facing the public will always be asked, "How come you have a price hike?" So, I hope, if that challenge can be left to EMA to announce the price hike, compared to SP Group, that would actually help to eliminate the stress that is faced by my fellow members and workers.
I think there is a confluence of the sector agencies that determine the price hike. We are exposed to global energy prices and, when oil prices rise, electricity prices will, of course, rise in tandem. But, collectively, EMA looks at the wheeling charges, looks at multiple components, including the grid charges, fuel price components directly attributable to fuel costs, the procurement of fuel costs, and the non-fuel costs and then, collectively, come up with a calibrated price increase.
So, it is working in conjunction. But, ultimately, EMA determines the price rise. I hope that answers the question.
Mr Leong Mun Wai.
Speaker, PSP is of the view that inflation is here to stay. It will be a multi-year uptrend. The earlier and the more contingency plans we have, the better. So far, all our discussion in this Chamber has concentrated on cost.
I have two questions to ask the Minister for Manpower about income and wages. I would like to ask the Manpower Minister: one, are there plans in place to ensure that Singaporeans' incomes and wages will rise with inflation going forward because we expect inflation to be a multi-year phenomenon? Two, because Singaporeans are in constant competition with foreigners, how to ensure Singaporean workers will continue to be competitive vis-a-vis foreign manpower in a rising wage environment?
Mr Speaker, I think this is an MTI statement, but I think since the Member wishes to clarify, then perhaps I may have the opportunity to just elaborate a bit on this?
Please proceed.
Thank you. We have been very focused on uplifting the lower-wage workers. In fact, I think the whole crux of this year's Committee of Supply (COS) and pretty much the last two quarters of last year, Senior Minister of State Zaqy Mohamad has gone out to talk about the Progressive Wage Model, how we have set up schemes, we have also illustrated the fact that the bottom 20%, in terms of their wage growth over the years, has exceeded the median wage rise for the rest of the salaries in our constant and consistent efforts to ensure that we continue to uplift our low-wage workers.
On top of that, to support businesses, to alleviate the cost of this Progressive Wage Model, the Government has also put aside a significant sum of money to help companies transition by the Progressive Wage Credit Scheme.
That is one big portion of what uplifting is all about. If the Member had sat through the MOM COS, our three focuses this year were uplifting, upgrading and upholding. So, while we uplift them, we also have to upgrade them. So, the significant programmes in terms of upskilling them, reskilling, helping them to pivot, we have, together, on a multi-sectoral, multi-Ministerial level, gotten the industry transformation maps and to match the industry transformation maps with the Job Transformation Map (JTM) which provides a very good guide and compass as to where companies are, in terms of the development forward. And we help them. We have Productivity Solutions Grant, multiple different schemes to help companies to pivot while we train and upgrade our Singaporean Core. So, that is the upgrading part.
Upholding fairness. We ensure that with the Tripartite Committee on Workplace Fairness (TCWF), we are now looking at how we are going to move this into legislation. On top of that, for foreign workforce complementarity, we have also rolled out COMPASS, which is a complementarity assessment framework to allow us to bring in foreign talent in a very nuanced way so that they are able to contribute to our strategic economic priorities, they can address the training of our locals in uplifting and making sure that we are world-class in terms of our workforce.
Those are a whole multitude of measures that we have put in place. Obviously, we are also working in terms of making sure that we strengthen the retirement savings in our CPF account, we continue to press ahead, to nudge our people to upgrade themselves. Through all of our SGUnited programmes, as I have shared earlier on, for the mid-career, for the older workers, we will make the SGUnited programme a permanent fixture of our policy. The entire list of measures that we have done to help our local Singaporeans continue to move ahead, to make sure that their real wages exceed inflationary rates, I think those are the measures that we have. I am not sure what other suggestions or other better solutions PSP has today.
Mr Leong Mun Wai.
Thank you, Speaker. Just to confirm what the Minister has said. So, the Progressive Wage Credit has taken into consideration future rise in inflation to ensure that Singaporeans' incomes and wages rise with inflation. So, just to confirm that is correct. Secondly, with regard to the COMPASS scheme, I hope tomorrow I will have another opportunity to debate the Minister on the scheme.
Would the Minister like to respond?
Mr Speaker, Sir. May I remind the Member that we are talking about cost of living, inflation, energy fuel prices and goods. If he would like to file a separate Parliamentary Question on the manpower issues, I am happy and always waiting for him to do so.
Dr Lim Wee Kiak.
Thank you, Sir. I would like to ask one clarification from both Ministers, with regard to the Statement they have made to say that if inflation were to go up higher, the Government stands ready to help both the residents as well as the businesses. Currently, inflation is already very high. So, the big question is, how high, what is the threshold that you are waiting for before more help can be delivered and what is the help that the businesses and the citizens can expect?
Mr Speaker, the Government will continue to monitor a range of macroeconomic indicators. We look at our economic growth, for example. We look at inflation. We look at the impact of inflation on different groups. We look at real incomes, for example. And on real incomes, I think it is important to highlight it is not possible for the Government to fix nominal wages, to guarantee that real incomes will always be positive. We do not determine wages. But what we can do is continue to work hard on all the things we are doing to restructure, transform the economy, uplift productivity. Those efforts will pay off and will help us year by year to ensure that incomes rise and, hopefully, continue to rise faster than inflation. That must be our economic strategy.
You cannot make this happen by fiat. You cannot dictate wages, but you can continue to press ahead with restructuring and transformation, which is what we are doing across all our economic agencies.
On the point of how high should inflation have to be before we see more help, I think that is what Dr Lim Wee Kiak is asking. I am not able to give a specific trigger point now. As I have said, we will monitor a range of indicators. Not just the headline of economic growth, inflation, for that matter, unemployment, but also how it impacts different groups and different income groups, different occupations. And then, what is the impact of our current package of measures which has not been implemented? We need to see that properly implemented and feed through the economy as well.
So, there are all these different considerations and that is why we cannot so simply distil it to just one key parameter. But the assurance that we continue to give is, we will monitor this very closely and, should there be a worsening of the situation externally and within Singapore, we will, certainly, stand ready to do more.
Mr Saktiandi Supaat.
Mr Speaker, I am following up on the question that my residents raised to me. Over the past Meet-the-People sessions online, there were a few residents who are local small SMEs who came to me highlighting about the rise in electricity prices. And I think it is in reference to my Parliamentary Question as well on small SMEs.
So, my question is, with regard to whether MTI or MOF is amenable to a lower-tier TRECS, for example, as we know, the TRECS that we have now is applied to larger SMEs and whether, in the future, there could be a lower tier. My concern is, local SMEs are very important because they employ quite a significant number of workers and we are talking about wages, jobs and unemployment. We need to address the local SMEs which employ a significant number of our local workers. And such a move, if it is amenable to MTI or MOF, in terms of a lower-tier TRECS in the future, whether that is a possibility.
Mr Speaker, I understand the Member's angst and I feel the same angst for all SMEs.
I think when you look at the tier, indeed, this is exactly what we have tried our level best to do. So, for companies, SMEs or even larger enterprises which do not want to go on a fixed price contract for a longer term, we offer them TRECS. This is on a monthly basis because there are many SMEs that are still hoping that the current high prices are temporary and they are hoping that, with the spot prices, thinking that by the time they reach June or July, they may drop. Therefore, they want to hold off and wait for it to drop before they enter into a longer-term contract. So, the flexibility that we give in providing monthly and then, separately, we went on to talk to, as I have shared just now, Sembawang and Keppel, to provide longer contracts – six months, one year, two years, up to three years – provides a lot more predictability and some level of certainty, albeit not back to what it was before.
I guess the part that we are in this difficult position is, if you are saying that you want to have a separate tier, a lower tier, then that price differential has to be subsidised by someone, right? Perhaps I may be getting it wrong – the Member can clarify. But if the Member is suggesting that the Government steps in to subsidise that component, then I think it will be very difficult because electricity power consumption is one of those things: how do you subsidise that when people will then just keep consuming more? I think that is the difficult part.
So, to the extent that is possible, what we have done is that we have continued to ensure stability, security, consistency of the supply. The pricing part, what we have tried to do is also to negotiate on their behalf to see how, depending on the needs of the different companies, some, because they feel they cannot take a long-term hedge, we then provide on a monthly basis and that is TRECS. For those companies which feel that they need to have this at least on a stable basis for six months, we have also provided the option for that and then up to a year, two years and three years. I think that, today, is a very nuanced approach that we have adopted.
Assoc Prof Jamus Lim.
Thank you, Speaker. Could I clarify with Minister Lawrence Wong that there will actually be no specific measures that are targeted towards households as well as small businesses that are operating in the transportation sector? Of course, I understand Minister Lawrence Wong's arguments about how broad-based fuel excise taxes are regressive and, of course, I understand the concept – I would like to think I understand the concept – of externalities and I also wish that these Budget measures, when they are brought forward, should be allowed to operate.
That said, CPI was 4.3% but it was 17.2% in the latest figures for the transportation sector. So, households operating vehicles for commercial purposes, while they do benefit from budgetary measures as consumers, they are also facing higher prices as both consumers and producers. So, even if you wish to limit the beneficiaries of transportation-specific relief, I wonder whether there will be some targeted measures either captured by the road taxes that are being paid by these families or in terms of whether they use commercial vehicles for the purposes of business.
Mr Speaker, I believe Assoc Prof Jamus Lim is referring to businesses that are running on commercial vehicles and, therefore, impacted by the higher pump prices and that would include taxi drivers, private hire car drivers, delivery drivers and the like.
As I mentioned just now, some companies are already making adjustments. They are already raising their fares to help their drivers. For example, some taxi companies are still continuing with rental concessions and there are other companies that are also doing other things to help their delivery drivers. So, these are in place today, which means that the costs are being shared with consumers because the fares go up, delivery rates go up, which means that the costs are shared in part, not just borne solely by these delivery riders but shared with consumers.
And as I mentioned, we have helped to cushion the impact on consumers also through different packages that we have in the Budget. We also have a Small Business Recovery Grant that will be applied to all SMEs who are in the affected sectors, including people who are running logistics, delivery. They would be eligible if they meet the criteria. So, the schemes are there. Companies themselves have adjusted. There is some cost sharing now. As I said earlier, let us monitor the effects of all that we are doing, how it percolates through the economy before we decide on our next steps.
Ms Janet Ang. Sorry. Mr Liang Eng Hwa.
I thank the Finance Minister for the new measures that were just announced and also the response to my Parliamentary Question about the timing of the payouts.
Sir, much of the cost increases are supply-driven. So, the COVID-19-related situation, the supply chain stressors, the war in Ukraine and the wages in which we want to have wage uplift. So, my concern is that there is this series of cost increases and price increases, it will inter-feed into each other and whether that will trigger off an inflationary spiral.
So, I would like to ask the Finance Minister what can the Government do to break this chain of interaction in the prices and the costs and then to counter this momentum of price increases.
My second question is for Minister Tan See Leng. I appreciate the Committee Against Profiteering (CAP) to check on unjustifiable profiteering. But we also know that this is not a magic bullet. You still need competition to counter all these profiteering and there must be choices for consumers. So, I would like to ask Minister Tan See Leng whether CAP would focus more on those sectors or businesses that have less choices for consumers, less competition where their businesses have bigger market power. How can we focus on those and, in particular, whether CAP or CCCS has identified any of these sectors?
Mr Speaker, just before I reply to Mr Liang Eng Hwa's question, just a quick clarification on my response to Assoc Prof Jamus Lim just now. I said Small Business Recovery Grant is extended to different sectors. Transport, logistics are not eligible. It is for the sectors affected most by SMMs, which mostly are F&B and retail. But the broader point remains, which is, that many of these companies in the transport and logistics sector have made arrangements, fares are going up, they are cost sharing with consumers, who also benefit through the help measures from the Government. So, let us monitor what is happening in this space, the effects of our measures, before we consider next steps. Just a clarification on that point.
On Mr Liang Eng Hwa's point, he is absolutely right that we have to watch carefully the dynamics which he talked about, a wage-price spiral potentially taking place. For now, inflation expectations are well-anchored. And as far as the labour market tightness is concerned, there are some ways in which we can help ease the current situation. For example, the opening up of borders will allow more migrant workers to come in, particularly in some of the hard-pressed sectors like construction, marine and process, and this will help ease the situation.
Secondly, we are continuing to do everything we can on our productivity efforts, as announced in the Budget, and the more we can push on this front to reduce reliance on labour, to go for automation, productivity initiatives, that will also help ease some of our manpower constraints. But the risk of a wage-price spiral taking place is real and that is why it also means we have to be very careful in designing any future Government interventions, because, if we are not careful, the Government spends more and this feeds into wages and then it may inflate prices and wages, and it may cause inflation to be worse.
That is why, as I mentioned just now, the basic strategy and approach are to let whatever we have announced in the Budget, which is already very generous, get implemented properly first, monitor the effects on the economy before we consider next steps, taking into consideration at that time the wider economic situation externally, the economic situation within Singapore and, for that matter, our own fiscal situation. I mean, do not take it for granted that the Government has all the money to do everything because we also have to ensure sound and sustainable public finances at the end of the day.
Minister Tan See Leng, can you wrap up?
Sorry, Mr Speaker, because Mr Liang Eng Hwa had two questions. I will be quick.
CAP's focus is on the essential food items commonly consumed by Singaporean households and non-food essentials, such as household products. Earlier on, I had shared that we will also take a data-driven approach to prioritise the investigations and I said that there will be a sharing of data across different agencies itself. I think one thing I want to thank the Member for suggesting is the observation, in terms of some of those very small sort of tight sectors. I think the best way to counter profiteering is really to promote competition, to have a wider range of service and product offerings. So, those are things that we are indeed looking into.
Order. End of Ministerial Statement on Inflation and Business Costs. Now, we will proceed to the Ministerial Statement by the Minister for Law, Mr Shanmugam.
PAPERCUTS