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The Annual Calculus: Singapore's Budget

Image: Credits to Unsplash (Unsplash: Venus Major)

In This Explainer, Find Out...

  • Why do governments need budgets?

  • What are the key features and themes of Singapore’s annual budget?

  • What can we expect in Budget 2024?


We all witnessed the viral moment when Deputy Prime Minister Lawrence Wong took to Instagram, declaring the 2023 Budget Statement as his "Valentine's Day present to all".¹ But beyond the social media buzz, why do budgets exist? How does the budget impact the daily lives of Singaporeans? 

This Policy Explainer first delves into the heart of the budget, explaining the historical significance behind it. It then details a seven-stage ‘budget process’ before highlighting three themes that we expect to be featured in Budget 2024.

A Brief History on Budgets

The concept of budgeting can be traced back to ancient history.² Babylonian and Egyptian civilisations had adopted systems to manage grain supplies and money. The Romans also used estimates of income and expenditure to determine tax rates. 

However, the modern budget only emerged in England in the 12th century,³ differing from past systems as ordinary people were allowed a say in it. It also performed two functions. First, to control the King’s power to tax, and second, to curb the spending of public officials. Budget statements became yearly affairs in England as early as 1760. They were presented to the English Parliament and took the form of a report on national finances. 

Since then, the practice of budgeting has spread globally.⁴ Many countries adopted formal budgeting processes and institutions during the 20th century, and today, virtually all countries have them. 

The Need for Budgets

Governments manage a large amount of funds today. A large proportion of these funds come from taxation. As of 2023, Singapore has a tax-to-GDP ratio of 15.5%.⁵ This means that for every S$1 produced by the economy, the Government collects 15.5 cents. That is a lot of money. At S$70 billion, you could afford 20 billion plates of chicken rice or over 100,000 BTO flats. Governments may also accumulate funds via fees and charges.⁶ In Singapore, this includes school, parking, and transport fees. They also include charges to regulate demand like the ERP charge. Finally, the Singapore Government has an additional source of funds known as the Net Investment Returns Contribution, which comes from returns on invested assets and our past reserves.⁷

The funds collected by the Government are meant to be used for public purposes.⁸ Today, governments are expected to provide and maintain public services like healthcare, education, and security. Governments also play a role in redistribution, ensuring that all members of society share income and wealth equitably. For instance, they may offer subsidies and cash transfers to support households in their day-to-day expenses. Lastly, governments can play a key role in shaping a country’s economic performance. A government’s fiscal policy can help promote growth and manage unemployment. Targeted grants and loans can help local businesses grow. Maintaining a healthy, productive workforce with the right skillsets also uplifts wages and strengthens growth.

To perform these functions, governments must be entrusted to collect taxes from the population and spend them judiciously for the public good. Governments must also consider the trade-offs of their spending decisions holistically. For instance, allocating funds to support lower-income households financially will mean less funds to upgrade healthcare infrastructure. 

How can we ensure that government money is spent wisely with trade-offs well accounted for? This is where annual budgets come in. By requiring governments to prepare detailed revenue and spending plans outlining how money will be collected and used in the next financial year, we allow Parliament (in Singapore’s case) and other stakeholders to scrutinise and offer feedback on the budget.⁹ Ultimately, this process allows financial plans to be refined, allowing the Government to spend in the best interests of society. 

The Singapore Budget

Like its global counterparts, the Singapore Government annually seeks parliamentary approval for its financial plans. To the general public, this ‘budget process’ starts with the Budget Statement made in mid-February each year. However, a flurry of activities precede and follow the Budget Statement, coming together to form Singapore’s budget process (see Figure 1). 

Figure 1: Timeline of Singapore’s Budget

Stage 1: Budget Planning

Months before the Budget Statement, government agencies in Singapore (which includes both ministries and statutory boards) will set themselves to work, preparing their financial plans for the upcoming year.¹⁰ 

Financial plans are typically made in consultation with the Ministry of Finance (MOF), which oversees budget preparation. When deliberating the plans, government agencies will first consider their priorities for the upcoming year. They will also consider the trade-offs that entail different spending decisions. Finally, they will review whether their plans are financially sound and viable. 

Stage 2: Pre-Budget Engagements

While government agencies engage in budget planning, the Government also organises a series of engagements to solicit views and suggestions for the upcoming budget.

First, Singaporeans may share their views via Budget Feedback channels. The feedback typically revolves around several themes that will define the upcoming budget. Feedback channels include a feedback form and social media platforms managed by REACH, the Singapore Government’s Feedback unit.¹¹ They also include physical and virtual engagement sessions run by REACH, the People’s Association (PA), and other government agencies.¹²

Second, MOF organises a series of engagements with key stakeholders.¹³ In the run-up to Budget 2024, Deputy Prime Minister (DPM) Lawrence Wong has attended engagements with business, union and community leaders. This has allowed stakeholders to voice their concerns and offer feedback on the budget itself, which would have been firmed up by then. The feedback is then reviewed, with changes to financial plans made ahead of the Budget Statement.

Stage 3: The Budget Statement

The Budget Statement is the highlight of the budget process. This is delivered by the Minister for Finance (currently DPM Wong) in mid-February each year. In this statement, the Minister for Finance will discuss the state of the economy, introduce key focus areas, and outline revenue and spending plans for the upcoming year. Financial plans are documented in a piece of legislation known as a Supply Bill.¹⁴ The Bill specifies how much money can be spent by the Government for what purposes, and will govern Government spending for the next financial year when approved.

Stage 4: Budget Debate 

Following the Budget Statement, Parliament proceeds to debate the budget.¹⁵ Here, Members of Parliament (MPs) may speak on any topic related to the budget. They may offer their feedback on the budget proposals outlined or highlight matters that were not adequately addressed in the budget. Collectively, they reflect the myriad of views and concerns that Singaporeans harbour. The Minister for Finance will respond to them in their Budget Round-Up Speech, using the feedback to guide and fine-tune current and subsequent iterations of the budget

Stage 5: Committee of Supply

With the budget debate concluded, Parliament proceeds to sit as a Committee of Supply.¹⁶ In this stage, every ministry must present its plans for the upcoming year and estimate the required funds. Parliament is tasked with scrutinising these plans, raising disagreements or complaints as they deem fit. After the debates conclude, Parliament will vote on the fund estimates. The entire process typically takes seven days or more, after which Parliament may return to debate and vote on the Supply Bill as a whole.

Stage 6: Voting on the Supply Bill

After a lengthy process spanning close to a month, Parliament is ready to vote on the Supply Bill. By receiving sufficient votes and the President’s assent, the Supply Bill becomes a Supply Act.¹⁷ This marks the end of the official budget process, and the Supply Act will govern the Government’s spending for the next financial year.

Stage 7: Post-Budget Dialogues

However, discussions on the budget are not over just yet. After the budget season has wrapped up, government agencies will hold a series of post-budget dialogues. These platforms give Singaporeans a chance to express their sentiments about the budget. They also offer the Government a chance to explain and clarify budget measures in detail.

In the past, the PA and National Youth Council have organised post-budget dialogues with the community.¹⁸ Business associations have also organised dialogues to discuss how budget measures may affect their respective industries.¹⁹ All this ensures that Singaporeans are well informed about the year’s budget and share their views and suggestions on the way forward.

Singapore's Last Three Budgets

Having looked at Singapore’s budget process, we now turn to the key themes of Singapore’s 2021 to 2023 budgets.

The 2021 ‘Emerging Stronger Together’ budget emphasised on helping Singapore rebound and emerge stronger from the COVID-19 pandemic. Measures announced include an unprecedented S$11 billion COVID-19 Resilience Package that focused on tackling the immediate challenges of the pandemic.²⁰ The Government also offered more support to workers and businesses, such as the COVID-19 Recovery Grant.

Released in a post-pandemic world, the 2022 ‘Charting Our New Way Forward Together’ budget was particularly significant, with a dual emphasis on renewing Singapore’s social compact and updating the taxation system to become more resilient.²¹ DPM Wong announced a staggered two-year increase in the Goods and Services Tax (GST) from 7% to 9%, and a further increase in the top marginal Personal Income Tax rate from 22% to 24%. To cushion the impact of the GST hike on lower-income families, a S$6.6 billion Assurance Package was further announced.²² 

Most recently, the 2023 ‘Moving Forward In a New Era’ budget was DPM Wong’s “Valentine’s Day present” to strengthen the social compact in Singapore and build collective resilience.²³ The Assurance Package was further enhanced to provide additional relief for households, while further support for workers was provided through measures such as mandating CPF contributions for ‘gig’ economy workers.²⁴

The 2024 Calculus?

With Budget 2024 around the corner, you might wonder what we can expect from this year’s budget. 2024’s pre-budget engagements offer some insights. 

Public inputs were sought on three themes via Budget Feedback channels, namely:²⁵

  1. Developing a Competitive and Sustainable Economy;

  2. Forging a Strong Social Compact; and

  3. Strengthening our Security and Resilience.

We surmise that Budget 2024 will be built around these three themes. What exactly can we expect under each theme?

Developing a Competitive and Sustainable Economy

To nurture a competitive and sustainable economy, we expect part of the Budget to be aimed at upskilling and reskilling programmes. The Forward SG report suggested revising the SkillsFuture credit system to aid more Singaporean workers. For instance, financial grants and support may be extended to those who are taking longer time off work. As for employers, some burdens may be offset by co-paying salaries for employees who participate in upskilling programmes. Unemployment benefits may also be introduced through a revamped SkillsFuture system.²⁶

Budget 2024 may also include funding measures to support businesses in transformation, innovation, and capability building. These have been outlined in past budgets, and Budget 2024 is likely to double down on them.²⁷ One major area of transformation is Artificial Intelligence (AI) adoption. In line with the National AI Strategy 2.0, Budget 2024 could contain grants for developing and implementing AI in businesses, government and education.²⁸ Supporting AI adoption will increase Singapore’s economic productivity, strengthening our competitiveness in the long term.

Meanwhile, support for industries affected by the pandemic will likely be tapered off. This is in light of the strong recovery in pandemic-hit sectors such as aviation and hospitality.²⁹ 

Forging a Strong Social Compact

A strong social compact is never a given, but one that is gradually forged. Budget 2024 is expected to detail how funds will be allocated to strengthen Singapore’s social compact. This will build on the Government’s past efforts while incorporating recommendations from the Forward SG Report and other roadmaps announced in 2023.³⁰ 

First, Budget 2024 may discuss measures for reducing wage inequality. For instance, updates to the Progressive Wage Model, which seeks to uplift the wages of low-income Singaporeans, may be announced.³¹ Measures to narrow the wage gap across different graduates may also be announced, as was alluded to in the Forward SG Report.³²

Second, Budget 2024 could introduce funding support for the creation of inclusive employment and spaces for persons with disabilities and special needs. This is in line with the Enabling Masterplan 2030.³³ The allocation of parental leaves and grants like the Baby Bonus could be reviewed to assure families and their well-being.

Third, we expect funds to be allocated to support the transition to the new ‘Standard’, ‘Plus’ and ‘Prime’ classification framework for Build-To-Order flats.³⁴ This new framework will see ‘Plus’ flat buyers being offered greater housing subsidies to ensure that flats in ‘choicier’ locations remain affordable.³⁵

Strengthening our Security and Resilience

Spending on national defence is expected to remain similar to previous years under Budget 2024. This is necessary to support the Singapore Armed Forces in maintaining a modern, technologically advanced military that can respond effectively to changing landscapes and evolving threats.³⁶

Budget 2024 is expected to support measures to enhance Singapore’s climate security too. Singapore will raise its carbon tax by five times its current rate in 2024.³⁷ Companies can also begin to use international carbon credits to offset up to five per cent of their emissions from 2024.³⁸ Finally, Budget 2024 may offer greater support for Singapore to achieve net-zero emissions by 2050.

Beyond the Numbers

The Singapore Budget is a serious affair where the Government outlines its financial plans for the fiscal year. Many governments consistently spend beyond their means and incur significant government debts, potentially competing with public funds for private investment. Worse, excessive spending can lead to debt crises such as that in Greece in 2009. 

The Singapore Budget is a rigorous process that fulfils our needs and interests, both in the short and long term. More importantly, the process is a partnership between Singaporeans and the Government, consisting of debates and dialogues that refine and clarify Singapore’s budget position.

Today’s needs are arguably more complex and expensive. While the upcoming Budget Statement will not be made on Valentine’s Day, it is nevertheless a present to prepare Singapore and Singaporeans for tomorrow’s opportunities and challenges.

MAJU PE_2024_06_The Annual Calculus Singapore's Budget
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This Policy Explainer was written by members of MAJU. MAJU is an independent, youth-led organisation that focuses on engaging Singaporean youths in a long-term research process to guide them in jointly formulating policy ideas of their own. 

By sharing our unique youth perspectives, MAJU hopes to contribute to the policymaking discourse and future of  Singapore.

¹ Mansor, Ili N., and Daryl Choo. 2023. “DPM Wong says Budget 2023 on Feb 14 is his 'Valentine's Day present' to help S'poreans cope with rising costs.” Today Online, January 3, 2023.
² Flesher, Dale, and Tonya Flesher. 1979. “Short History Of Budgeting.” eGrove.
³ Ibid.
⁴ Ibid.
⁵ CEIC. n.d. “Singapore Tax Revenue: % of GDP, 1987 – 2023.” CEIC. Accessed February 8, 2024.
⁶  Ministry of Finance. n.d. “ANNEX F-1: GOVERNMENT FEES & CHARGES.” Ministry of Finance. Accessed February 8, 2024.
⁷ Ministry of Finance. n.d. “How do Singaporeans benefit from our Reserves?” Ministry of Finance. Accessed February 8, 2024.
⁸ Due, John, John Kay, and Assar Lindbeck. 2024. “Government budget | Definition, Types, Features, Objectives, & Facts.” Britannica.
⁹ Tetlow, Gemma, Thomas Pope, and Joe Marshall. 2018. “Budgets.” Institute for Government. ; Ryan Lee and Titus Soh. 2023. “Unpacking Singapore's System of Government: The Legislature.” MAJU.
¹⁰ Ministry of Finance. 2023. “Budget | About Budget.” Ministry of Finance.
¹¹ REACH. n.d. “ShareYour Views And Feedback On Budget 2024.” REACH. Accessed February 8, 2024.
¹² Ministry of Finance. 2023. “MOF Invites Views and Suggestions for Budget 2024.” Ministry of Finance.
¹³ Ministry of Finance. 2016. “We are just 10 days away from Budget 2024.” LinkedIn.
¹⁴ Parliament of Singapore. n.d. “Glossary - Supply Bill.” Parliament of Singapore. Accessed February 8, 2024.
¹⁵ Ministry of Finance. “Budget | About Budget.”
¹⁶ Ibid.
¹⁷ Ibid.
¹⁸ People's Association. n.d. “Post Budget 2024 Dialogues in the Community.” People's Association. Accessed February 8, 2024. ; National Youth Council. 2023. “Post-Budget 2023 Youth Dialogue.” Youthopia.
¹⁹ Singapore Retailers Association. n.d. “Post Budget Dialogue 2020.” Singapore Retailers Association. Accessed February 8, 2024.
²⁰ Ministry of Finance. n.d. “Budget Archives - Singapore.” Ministry of Finance. Accessed February 10, 2024.
²¹ Ibid.
²²  Han, YiHeng, Jingyan Lv, and Gavin Neo. 2023. “Keeping Up with Rising Costs: The GST Hike and Assurance Package.” MAJU.
²³ Ibid.
²⁴ Ibid.
²⁵ Ministry of Finance. “MOF Invites Views and Suggestions for Budget 2024.”
²⁶ Tham Yuen-C. 2023. “Unemployment benefits for retrenched workers among revamps planned for SkillsFuture: DPM Wong.” The Straits Times. Accessed February 8, 2024.
²⁷ Ministry of Finance. 2022. “The Singapore Budget Business Measures.” REACH (Reaching Everyone For Active Citizenry @ Home). Accessed February 8, 2024.
²⁸ Han, YiHeng, Li, Laiyi. 2023. “Charting Singapore's AI Journey: The National Artificial Intelligence Strategy 1.0.” MAJU.
²⁹ Ministry of Trade and Industry. 2023. “Economic Survey of Singapore.” Ministry of Trade and Industry. Accessed February 8, 2024.
³⁰ Toh, Brendan, Clara Ng. 2023. “(MAJU)lah Singapura: The Forward Singapore Exercise.” MAJU.
³¹ Lim, Jordan. 2023. “Leave No One Behind: Occupational Progressive Wages For Administrators and Drivers.” MAJU.
³³ Cheng, Hana, Tan, Vivienne. 2023. “An Inclusive Workforce: Empowering People with Disabilities.” MAJU.
³⁴ Toh, Brendan. Li, Laiyi, Thiagu, Sudeesh. 2023. “Changes to HDB Build To Order Classification: The Introduction of Plus Flats.” MAJU.
³⁵ Ibid.
³⁶ Thrina Tam. 2023. “SAF must continue investing steadily to build its capabilities & people: Dr Ng.” Pioneer. Accessed February 8, 2024.
³⁷  Choo, Benjamin,  Clara Ng, Siddhant Vaduvur. 2023. “Singapore's Climate Action Plan: The Little Red Dot's Push to Combat Climate Change.” MAJU.
³⁸ National Climate Change Secretariat. n.d. “Carbon Tax.” National Climate Change Secretariat. Accessed February 8, 2024.
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