Tharman's budget debate speech | Jorbb.com

The following are excerpts from the speech given by Finance Minister Tharman Shanmugaratnam as part of the Budget 2009 Debate Round-up in Parliament yesterday.

On the Jobs Credit scheme

In particular, the Jobs Credit was designed to put money in the hands of all businesses quickly, and to be simple to administer.

• We had in fact considered giving a rental credit in combination with the Jobs Credit.
• But it would have slowed implementation, because a rental credit would have required declarations by companies, and subsequent verification.
• It is much speedier to implement the Jobs Credit, and at little administrative cost, because it is based on readily available CPF data.
• We therefore decided to do away with the rental credit, and increase the Jobs Credit, to 12% of wages, so that the total impact of businesses would be roughly the same, but delivered much faster.

We are giving a Jobs Credit to the employer directly. This means the employer pays the CPF, and the Government provides a cash grant to the employer through the Jobs Credit after the employer has paid CPF.

In substance, the Jobs Credit is equivalent to the Government paying the employer's CPF contribution. The 12% Jobs Credit has the same impact for the employer as the alternative approach which would be for the Government to cut the employer's CPF contribution rate by 9%, and top-up the employee's CPF account.

Both approaches keep workers' wages and CPF intact. There is absolutely no difference for the workers' CPF accounts. Both help employers with their wage costs.

Three key objectives

Ultimately, the Resilience Package is about Singaporeans ? helping our people now, and securing the future for ourselves. We have shaped the Budget to focus on three key objectives, aimed at helping Singaporeans where it matters most.

Jobs for Singaporeans. The first and key objective is to help businesses so that they can preserve jobs to the maximum extent possible in this recession.

The largest part of the Package therefore comprises support for businesses - through the Jobs Credit and SPUR; through the many tax measures; through the SRI to sustain bank lending to businesses; and through our Government spending initiatives which will create demand for our businesses.

We are also creating jobs through substantially expanded Government hiring (18,000 jobs).

Direct help for households. Second, we are helping households directly, with something for everyone, but more for the lower and middle income groups.

Confidence in the future. Third, we are preparing for recovery and to emerge more competitive for our next phase of growth.

On helping all firms

Some MPs have argued that we should be giving less support to the profitable businesses, and more support to the weaker ones. This would not be the right approach. If we do this, we will only be weakening the ability of the business sector to create employment, not just now but in the future, and weakening the strength of the recovery in the economy.

We would like to identify viable firms - those that are most likely to keep their workers through the crisis - and focus our support on them. However, there is no workable way to sift out such businesses under current circumstances.

The best approach is to go for simplicity and provide broad-based support to all businesses regardless of whether they are profitable or loss-making - provide all of them with the Jobs Credit, SPUR and tax measures, such as the property tax rebate and the loss carry-back scheme.

On the personal income tax

There are two reasons why we capped the 20% PIT rebate at $2,000.

First, increasing the cap would only benefit a small proportion of the population, but at a high cost to revenue: Only the top 5% of our resident labour force are affected by the cap of $2,000. The middle class, including the upper-middle class, are not affected by this cap. ii. Removing the cap would be costly to revenues. Even raising it to just $3,000 would have cost us an additional $100m.

Second, a larger rebate would not give us as much bang for the buck as a measure to boost demand. Unlike the lower and middle income groups, the top income groups tend to save most of the benefits that they receive. This is one of the least contested facts of economics anywhere in the world. The marginal propensity to consume among the rich is low. Conversely, it is very high amongst the lower income groups - they tend to be cash constrained and spend most of the additional benefits that are handed out.

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