Budget Speech
+ Table of Contents


Economic Performance in 2017

Major Shifts in the Longer Term

Preparing for a Better Future


Overcoming Near-Term Challenges

Capturing Future Opportunities

Fostering Pervasive Innovation

Building Deep Capabilities

Forging Strong Partnerships

Together, a Vibrant and Innovative Economy


Building a Smart Nation

Investing in Sustainability Research

Reducing Emissions

Together, a Smart, Green and Liveable City


Supporting Individuals and Families

Strengthening Partnerships between the Government and the Community to Support our Seniors and Those in Need

Encouraging a Spirit of Giving

Together, a Caring and Cohesive Society



Starting from a Position of Strength

Preparing for our Future Expenditure

Fostering Prudent Spending

Infrastructure Investments – Save and Borrow

Future Needs – Strengthen our Revenues

Reserves – Ensure Sustainable Use

Enhancing Progressivity, Fairness and Resilience of our Tax System

Together, a Fiscally Sustainable and Secure Future


Summary of Budget Position (FY2017 and FY2018)

Together, a Better Future


Annex A-1: Support For Business Restructuring (pdf262kb)

Annex A-2: Measures To Foster Pervasive Innovation (pdf234kb)

Annex A-3: Support For Firms To Build Capabilities And Forge Partnerships (pdf344kb)

Annex A-4: Support For Workers To Deepen Skills And Manage Career Transitions (pdf353kb)

Annex A-5: Tax Changes (pdf530kb)

Annex B: Support For Building A Smart, Green And Liveable City (pdf399kb)

Annex C-1: Edusave Merit Bursary (pdf137kb)

Annex C-2: Transfers To Households (pdf313kb)

Annex C-3: Foreign Domestic Worker (FDW) Levy (pdf128kb)

Annex C-4: Measures To Encourage Philanthropy And Volunteerism (pdf248kb)

Annex D: Fiscal Position In FY2018 (pdf167kb)


E1. Mr Speaker, Sir, to secure a better Singapore for Singaporeans, we must ensure that we have the revenues and resources to do so.

a. That is why I stated at the outset that our Budget is a strategic and integrated plan, taking a longer-term view, and setting out our strategic challenges clearly and plainly.

b. This way, we can ensure a fiscally sustainable and secure future for Singapore.

Starting from a Position of Strength

E2. For this decade, from 2011 to 2020, we are on a sound fiscal footing. That is because we planned ahead early, and made the necessary moves well before the decade began.

a. We raised GST from 5% to 7% as early as 2007, and introduced the Net Investment Returns (NIR) framework in 2008.

i. These changes allowed us to enhance our healthcare, transport and social support systems, in the first half of the decade, from 2011 to 2015.

ii. During this period, we introduced MediShield Life and the Pioneer Generation Package, and enhanced Workfare.

b. In 2015, we made further revenue moves to include Temasek in the NIR framework, and raise personal income tax rates for the top income brackets. These changes enabled us to sustain our spending for the second half of the decade, from 2016 to 2020.

c. All in all, we were able to fund a significant increase in overall Government expenditures from $55.0 billion in FY2011 to an estimated $89.1 billion in FY2018.

i. As the Government has stated before, we have ensured that we have sufficient resources to meet our spending needs till 2020. This is a result of careful and prudent planning.

Preparing for our Future Expenditure

E3. But in the next decade, between 2021 and 2030, if we do not take measures early, we will not have enough revenues to meet our growing needs.

E4. We expect our spending needs to continue growing across all sectors, with some rising faster and more than others. Let me highlight a few:

a. One of the key areas of expenditure growth will be healthcare.

i. Since the start of this decade, we have more than doubled our healthcare spending, from $3.9 billion in FY2011 to an estimated $10.2 billion in FY2018. This increase went into building and operating more hospitals and other healthcare facilities, and enhancing healthcare subsidies.

ii. In the coming decade, with an ageing population and an increasing chronic disease burden, the demands on families and Government will rise. We will need to spend even more on healthcare.

1. Today, the average annual Government healthcare subsidies received by an elderly person is more than six times that of a younger person, or about $4,500 more.

2. By 2030, the total number of elderly will increase by about 450,000, to 900,000.

iii. We will have to build new healthcare capacity to meet the rising demand, and also invest in new medical technologies to improve care quality.

1. Within the next five years, we will build six more general and community hospitals, four new polyclinics, and more nursing homes and eldercare centres around the island.

iv. All in all, we expect our average annual healthcare spending to rise from 2.2% of GDP today to almost 3% of GDP over the next decade. This is an increase of nearly 0.8 percentage point of GDP, or about $3.6 billion in today’s dollars. Within the next decade, healthcare spending is expected to overtake education.

v. The Government will do its part to spend wisely and ensure greater value-for-money in our healthcare spending. Everyone has a role to play too, by taking care of our health, and saving up for our own and our families’ healthcare needs.

b. Another key area of expenditure increase will be infrastructure.

i. We have increased our infrastructure spending8 from $8.5 billion in FY2011 to an estimated $20.0 billion in FY2018.

1. We are building and upgrading flats, expanding and maintaining our rail and bus networks, and keeping public transport fares low for Singaporeans.

2. Over the next five years, the annual subsidies for keeping our buses and trains running will be comparable to the amount we spend on pre-employment training in polytechnics and ITE. And this does not even include the cost of building public transport infrastructure.

ii. Over the next decade, we will need to spend more to develop new infrastructure:

1. We will expand our rail network by over 100km;

2. Redevelop different parts of Singapore – Jurong Lake District, Punggol Digital District and Woodlands North Coast; and

3. Rejuvenate our ageing infrastructure such as water pipes, and HDB flats and lifts.

4. We will also build Changi Airport Terminal 5 (Changi T5), Tuas Port and the KL-Singapore High Speed Rail so as to ready ourselves for long-term economic trends.

iii. These are massive investments to anchor Singapore as the centre for economic activity in the region, create jobs, enhance liveability, and serve as a foundation for future growth.

iv. As my colleague, the Minister for National Development has said, “we are not done building Singapore yet.”

c. Third, we will also have to invest more in security to keep Singapore safe:

i. The terrorism threat to Singapore is at its highest in recent years. The range of threats we face is also wider, from major cyber-attacks, to online self-radicalisation.

ii. To counter these threats, we will need to:

1. Enhance the operational readiness of our officers;

2. Leverage technologies to enhance our response; and

3. Partner the community, so that we are all well-equipped to respond in emergencies.

d. Besides healthcare, infrastructure and security, we will also have to sustain our investments in education to give our young a good start.

i. Even though our student cohorts are falling, we are spending more per child, and dedicating more resources to help everyone reach his or her potential. In FY2018, our education spending9 is estimated at $12.8 billion.

ii. We are investing more in pre-school education, to give every child a good foundation, from a younger age. As the Prime Minister announced last year, we will spend $1.7 billion per year on the pre-school sector by 2022 – double of our annual spending now.

iii. We will continue to invest in lifelong learning, to help Singaporeans reskill and upskill so that they can access good jobs and thrive in the new economy.

E5. Hence, there is a need to strengthen our fiscal footing to meet these growing expenditure needs and to prepare for any unforeseen ones.

a. I have already spoken about this at last year’s Budget, and said that we would study various options.

b. The Prime Minister also mentioned this in November last year.

Fostering Prudent Spending

E6. Our fundamental strategy is to grow our economy. With a strong economy, we will have more resources with which we can meet the needs and aspirations of our people. The work of the FEC and the strategies I laid out earlier are therefore critical.

E7. At the same time, we must continue to manage our expenditure growth carefully and get the best value for every dollar we spend.

a. At 19.0% of GDP, our estimated overall Government expenditure10 in FY2018 is leaner than most developed economies.

i. And we have been able to get good value for our money, delivering good outcomes in areas like healthcare and education, which are highly ranked internationally.

b. Even so, to emphasise the need to be more prudent, I announced a permanent 2% downward adjustment to the budget caps of Ministries and Organs of State last year.

c. This year, I will further moderate the pace of Ministries’ budget growth.

i. Currently, Ministries’ block budgets are allowed to grow at 0.4 times of GDP growth. I will reduce this rate to 0.3 times from FY2019.

d. Our agencies are also on the lookout for ways to be more efficient and effective.

i. My earlier announcement to merge PGO with AIC and make AIC the central implementation agency for seniors is one example.

ii. Another is the Land Transport Authority (LTA), which has designed a four-in-one facility, integrating one bus and three rail depots in a single development. This achieved significant cost savings and freed up about 44 hectares of land. And this is larger than our Singapore Zoo and River Safari put together!

iii. Other agencies are tapping on emerging technologies to improve productivity. JTC Corporation, for instance, has co-developed a robot with the Nanyang Technological University (NTU) to facilitate building inspection works, reducing manpower and time required by 50%.

Infrastructure Investments – Save and Borrow

E8. For our infrastructure investments, the key challenge is that certain expenditures can be very lumpy, with hefty upfront investments. Yet, the benefits are enjoyed many years down the road.

E9. To address this challenge, we will do two things.

E10. First, where possible, we will save ahead in preparation for these lumpy investments. This will help reduce the burden in future years.

a. In 2015, we set up the Changi Airport Development Fund to start saving for Changi T5. We now have $4 billion in the fund.

b. This year, we will set up a new Rail Infrastructure Fund to save up for major rail lines ahead.

i. We will start with an injection of $5 billion in FY2018.

ii. This can be topped up in future years when our fiscal position allows.

E11. Second, we are looking at borrowing by Statutory Boards and Government-owned companies which build infrastructure. This will help spread the cost of certain large investments over more years. These infrastructure projects, once completed, will generate economic returns over many years. The borrowing arrangements for these projects will hence help distribute the share of funding more equitably across generations.

a. For example, the National Environment Agency will look at borrowing to finance the upcoming Integrated Waste Management Facility. LTA will also look at borrowing for upcoming projects such as the KL-Singapore High Speed Rail and the JB-Singapore Rapid Transit System Link. The Changi Airport Group, too, will look at borrowing for Changi T5.

b. Besides spreading out the costs to better match when the benefits of the investments accrue, such long-term borrowings will also help to develop our bond market.

E12. To help lower the financing cost, the Government will consider providing guarantees for some of these long-term borrowings for critical national infrastructure.

a. A Government guarantee will enhance the confidence of creditors.

b. This is another way to use the strength of our reserves to back our infrastructure projects, without directly drawing on the reserves. The reserves can then remain invested to generate returns.

c. We are studying this carefully and discussing it with the President and the Council of Presidential Advisers.

E13. Through both saving ahead and borrowing, we expect to smooth out and be able to meet our major infrastructure needs.

Future Needs – Strengthen our Revenues

E14. For healthcare, security and other social spending, the increases will be recurrent, will benefit Singaporeans broadly, and will directly benefit current generations. The responsible way to pay for them is through taxation so that every generation pays its share.

a. We should not borrow for recurrent spending, because that will put the burden of recurrent spending on future generations.

E15. Therefore, to support these recurrent needs, the Government plans to raise GST by two percentage points, from 7% to 9%, sometime in the period from 2021 to 2025. The exact timing will depend on the state of the economy, how much our expenditures grow, and how buoyant our existing taxes are. But I expect that we will need to do so earlier rather than later in the period.

a. This GST increase is necessary because even after exploring various options to manage our future expenditures through prudent spending, saving and borrowing for infrastructure, there is still a gap.

b. Increasing GST by two percentage points will provide us with revenue of almost 0.7% of GDP per year.

c. This boost in revenue will be vital in closing this gap. We will continue to manage our expenditures and the need for other future revenue measures carefully, and plan ahead early for our overall revenue and expenditure needs.

E16. We will implement the GST increase in a progressive manner, as we have always done in the past.

a. First, we will continue to absorb GST on publicly-subsidised education and healthcare.

b. Second, we will enhance the permanent GST Voucher (GSTV) scheme when the GST is increased, so as to provide more help to lower-income households and seniors. Today, we already disburse about $800 million per year from the GSTV Fund. This year, we will make a $2 billion top-up to the GSTV Fund to support these payments.

c. Third, we will also implement an offset package for a period to help Singaporeans adjust to the GST increase. Lower- and middle-income households will receive more support.

E17. We will provide more details once we have determined the timing of the GST increase.

Reserves – Ensure Sustainable Use

E18. When we mention the need to raise taxes, a natural question is: Why don’t we tap more on our reserves instead?

a. Indeed, we have been doing so over the last decade.

i. I mentioned earlier that we introduced the NIR framework in 2008. This started out with the reserves managed by GIC and Monetary Authority of Singapore (MAS). Temasek was then included in the framework in 2015.

ii. Through this framework, we now spend on the basis of total returns on our reserves, including both realised and unrealised capital gains.

E19. Over the last 10 years since the implementation of the NIR framework, the NIR contribution (NIRC) has more than doubled from $7.0 billion in FY2009 to an estimated $15.9 billion in FY2018.

a. The NIRC is now the largest contributor to our revenues, larger than any single tax, including GST, and corporate and personal income taxes.

E20. We are able to supplement our revenues with the NIRC today because our predecessors judiciously set aside the savings from the strong growth during Singapore’s earlier stage of economic development.

E21. Now that our economy is maturing, and our population is ageing, we must husband this resource carefully, prudently and responsibly.

a. Currently, we spend up to 50% of expected net investment returns, and keep the remainder in our reserves. This allows our reserves to grow with our economy.

b. If instead, we used 100% of the returns, the principal sum of the reserves will stagnate over time, and the NIRC as a share of GDP will consequently fall as our economy grows. The impact of this will not be trivial given that our budget now relies on the NIRC as our largest source of revenue.

c. In a more extreme scenario, if we spent more than our investment returns, we will eat into our nest egg. Doing so would mean that our reserves will shrink over time, generating a progressively smaller stream of income in the years that follow, till eventually our reserves are exhausted.

d. Mr Speaker, Sir, this is not the Singapore way.

E22. We must also never forget that as an island nation with no hinterland and no natural resources, our reserves lend long-term stability to our economy and afford us the means to weather crises.

a. During the 1997 Asian Financial Crisis, our reserves and strong economic fundamentals kept the Singapore dollar stable even as currency speculators were attacking other regional currencies.

b. During the 2008 Global Financial Crisis, our reserves anchored our economy against the storm by backing a $150 billion guarantee for all bank deposits in Singapore.

c. And during the recession in 2009, our reserves funded a total of $4 billion for the Jobs Credit Scheme and Special Risk-Sharing Initiative to help employers and employees tide over the difficult period.

E23. As a small and open economy, we will always be vulnerable to fluctuations in the global economy and financial markets. We can never predict where or when the next crisis will come. But we know, when the next crisis hits, we will be able to weather the storm because we have our reserves.

Enhancing Progressivity, Fairness and Resilience of our Tax System

E24. I will now introduce other changes to make our tax system more progressive, fair and resilient.

Enhancing Progressivity

E25. First, I will enhance progressivity. One common suggestion is to tax the rich and higher-income more, or introduce wealth taxes like a capital gains tax.

a. This reflects a desire for a progressive system, with those with more contributing back to society.

b. This is fair, and is precisely what we have done over the years.

i. We increased personal income tax rates for our top income brackets in 2015, and imposed a cap on personal income tax reliefs in 2016.

ii. We also introduced a progressive property tax system for residential properties in 2010, and made it more progressive in 2013.

c. This year, I will raise the top marginal Buyer’s Stamp Duty (BSD) rate for residential properties from 3% to 4%.

i. Today, our BSD rates for residential properties range between 1% and 3%, and have remained unchanged since 1996.

ii. The new top marginal rate of 4% will apply to the portion of residential property value which is in excess of $1 million. This change will apply to all residential properties acquired from tomorrow.

iii. The BSD rates for non-residential properties remain unchanged at 1% to 3%. (Refer to Annex A-5.)

d. Moving forward, we will continue to study options to ensure that our tax system remains progressive.

Enhancing Fairness and Resilience

E26. Next, to make sure that our tax system remains fair and resilient in a digital economy, I will introduce GST on imported services with effect from 1 January 2020.

a. Today, services such as consultancy and marketing purchased from overseas suppliers are not subject to GST. Local consumers also do not pay GST when they download apps and music from overseas. This change will ensure that imported and local services are accorded the same treatment. (Refer to Annex A-5.)

b. For the import of goods, there are international discussions on how GST can apply. We will review this before deciding on the measure to take.

Other Tax Changes

E27. Finally, to discourage consumption of tobacco products, I will implement a 10% increase in tobacco excise duty across all tobacco products with effect from today. (Refer to Annex A-5.)

E28. I will also be extending and strengthening other tax incentives to enhance our business competitiveness in this Budget. The details of these changes are in the Annex. (Refer to Annex A-5.)

Together, a Fiscally Sustainable and Secure Future

E29. Mr Speaker, Sir, I have just laid out the plans for our expenditures and revenues in the coming decade.

a. Expenditure in many areas will rise, especially in healthcare, infrastructure and security.

b. To meet these needs, we must plan ahead and prepare early. We need to remain prudent in our spending, save up where possible, and raise revenues, but in a fair and progressive way.

c. This way, we can ensure a fiscally sustainable and secure future for ourselves and our children.

8 Expenditures of the Ministry of Transport, the Ministry of National Development, and the Ministry of the Environment and Water Resources.
9 Estimated FY2018 Expenditures of the Ministry of Education.
10 Comprising Total Ministry Expenditures and Special Transfers including Top-ups to Endowment and Trust Funds.

Last updated on 19 Feb 2018