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SOLIDARITY BUDGET

A THIRD STIMULUS: THE SOLIDARITY BUDGET

STELLA LAU

AN EXTRA BOOST TO UNITY AND RESILIENCE BUDGETS

Just a day before the month-long nation-wide “circuit-breaker” measures kicked in, a third round of support measures was unveiled on 6 April 2020 by Deputy Prime Minister (DPM) and Finance Minister Heng Swee Keat in Parliament. The Solidarity Budget – so named to rally much-needed unity, mutual support and confidence in the face of the Covid-19 outbreak, dubbed the worst global crisis since World War II – arms Singapore with an additional $5.1 billion in its fight.

Smaller than the two earlier launched packages to mitigate the damage to the economy caused by the ongoing pandemic, namely, the $6.4-billion Unity Budget and $48.4-billion Resilience Budget, the Solidarity Budget was a quick response just 11 days after the preceding Resilience Budget was announced on 26 March 2020. Specifically, it is a decisive move to help businesses and workers tide over drastic but necessary circuit breaker measures that would close businesses and schools, directly affecting the majority of sectors and workers. It is aimed at saving jobs, protecting livelihoods and supporting businesses, to preserve capacity and capabilities.

Even as a nation well-known for fiscal prudence, Singapore has had to pull out all stops to strengthen its shield against the onslaught on its economic and social fronts. The three Budget packages to address the impact of the virus outbreak totals $59.9 billion, or 12% of Gross Domestic Product (GDP). Including the remaining allocated amount from the Unity Budget for more mid- to longer-term plans, the total expenditure stands at $160 billion for the year 2020, or about 32% of GDP. This is the largest spending in Singapore’s history, and has also resulted in the largest-ever deficit of $44.3 billion, or 8.9% of GDP. It also warrants a total draw of $21 billion from past reserves, of which $4 billion will be drawn to fund the Solidarity Budget (Figure 1).

Figure 1

Like the two earlier tranches of aid measures, the Solidarity Budget is broad-based and is aimed at disseminating widespread support quickly. An extension of the Resilience Budget, it features enhancements to newly introduced financial schemes and payouts. At the same time, there are also measures to provide emotional and mental support to Singaporeans, such as maintaining community mental health support services during the circuit breaker, and also the setting up of a new National Care hotline to offer psychological first aid. A summary of the enhancements is as follows.

1) HELPING BUSINESSES, WORKERS, AND THE SELF-EMPLOYED

Increased support in Cost, Cash, Credit

A. Costs and Cash Flow

  • The Jobs Support Scheme (JSS) provides support to businesses through subsidising wage costs for local and foreign workers. This applies to all 1.9 million local employees and is targeted at helping firms retain workers as well as continue paying workers without implementing no-pay leave or retrenchments. Enhanced measures are as follows:
    • Wage subsidy increased for all firms to 75% for the first $4,600 (median wage level of full-time employed residents) of gross monthly wages, for April 2020
    • First JSS payout brought forward from May to April 2020
  • For foreign workers, levy rebates and waivers will be provided. This will enable firms to take care of workers and retain them so that operations can quickly resume after the circuit breaker period.
    • Levy waived for month of April 2020
    • Levy rebate of $750 provided for each work permit or S-pass holder, based on previous levies paid in 2020
  • A second set of measures implemented is aimed at providing rental cost relief. Measures are reinforced through legalisation to enable enforcement. This is aimed at ensuring that benefits are cascaded down to tenants.
    • Bill introduced to allow deferment of contractual obligations such as paying rent, repaying loans, or completing work, for a period
    • Bill introduced to ensure property owners pass on Property Tax rebates in full to tenants
    • Increased rental waiver from the government, as a major landlord, for industrial, office, agricultural tenants to one month, up from 0.5 month. Stallholders in hawker centres and commercial tenants will continue to benefit from three months and two months of rental waivers respectively.


B. Credit

  • The government will also help enterprises with financing support and access. The government will increase its risk share of loans from 80% to 90% under the below-mentioned programmes, for loans initiated from 8 April 2020 to 31 March 2021.
    • The Temporary Bridging Loan provides working capital to enterprises. Eligible enterprises may borrow up to $5 million with interest rate capped at 5% p.a., from participating financial institutions.
    • Under the Enterprise Financing Scheme (EFS), the government’s risk share will be enhanced specifically for EFS-SME Working Capital Loan and EFS-Trade Loan programmes. Introduced to help enterprises better access financing throughout various stages of growth, the EFS-SME Working Capital Loan was designed to help small and medium-sized enterprises (SMEs) with working capital needs. The maximum loan quantum was raised from $300,000 to $1 million.
    • The Trade Loan (TL) programme helps enterprises with trade financing needs. The maximum loan quantum has been increased from $5 million to $10 million. It covers enterprises’ domestic and overseas transactions and complements the Loan Insurance Scheme (LIS) by insuring loans beyond the capacity of LIS insurers. The TL programme pertains to financing trade needs, including (i) inventory/stock financing, (ii) structured pre-delivery working capital (revolving working capital), (iii) factoring/bill of invoice/AR discounting, and (iv) overseas working capital loan.
    • SMEs can defer principal payments on secured term loans till end of the year. Over $40 billion of SMEs’ existing loans are likely to qualify for this relief.
    • Also, banks and financing companies can apply for low-cost funding through a new Singapore Dollar facility under Monetary Authority of Singapore, for loans granted under the EFS–SME Working Capital Loan and TL programmes. They must then pass on the savings to borrowers.


C. For Self-Employed Persons

Support under the Self-Employed Person Income Relief Scheme (SIRS) will be broadened and cater to self-employed people who also earn a small income from employment. It will be capped at $2,300 per month, which is the current Workfare income ceiling. The scheme will cover those who live in properties with annual value of up to $21,000, up from $13,000, which includes those living in condominiums and private properties.

Under the SIRS scheme announced in the Resilience Budget, self-employed persons will receive $9,000 in total payout over nine months, starting May 2020. This is expected to benefit about 100,000 self-employed persons, an increase from 88,000.

Other criteria will remain in place to ensure assistance is directed to those who are in need, including limiting the support to those who own two or more properties with their spouse. Their spouse’s income should also not exceed $70,000.

2) FOR HOUSEHOLDS

Direct and Quick Support in Cash

To provide direct and quick support to Singaporeans, a one-off $600 cash payout, named Solidarity Payment, will be issued in stages starting 14 April 2020.

In the Resilience Budget, under the Care and Support scheme, cash payouts of $300 to $900 will be paid out to every adult Singaporean, double the amounts announced in the Unity Budget. From this, $300 payout will be brought forward and topped up with an additional $300 to constitute the $600 Solidarity Payment.

This is over and above the remaining cash payouts of $300 and $600 under the Care and Support scheme, which will be issued later in June 2020 to lower- and middle-income Singaporeans. Additional $300 cash will be given out to Singaporean parents with at least one Singaporean child aged 20 and below. Those aged 50 and above can expect a $100 top-up of the PAssion Card, paid out in cash.

CONCLUSION

While the slew of measures is unlikely to be a panacea for all problems, it definitely provides temporary financial relief. In DPM Heng’s Supplementary Budget round-up speech, he pointed out that the best response to the crisis is to build resilience in the economy and society, an objective of the two additional support packages. He urged businesses to utilise the resources “wisely” and “responsibly”, reminding them to keep the longer-term view in mind and to be prepared for recovery.


Support measures enhanced for circuit breaker extension

On April 21, Prime Minister Lee Hsien Loong announced that the circuit breaker will be extended for another four weeks until June 1. Also, stricter restrictions will be imposed for at least two weeks, from April 21 to May 4. Along with this, support measures in the Solidarity Budget 2020 have been enhanced to protect livelihoods and stabilise businesses, and will cost an additional $3.8 billion. These include:

All other previously announced support and relief measures will continue to apply.


For IS Chartered Accountant Journal’s coverage of Budget 2020, please refer to:

For more information on the Budget, please refer to:

ISCA’s Covid-19 Navigator

ISCA has put together the Covid-19 Navigator that provides an overview of the schemes announced in the government’s support packages, industry transformation and development programmes, as well as ISCA’s initiatives. It is designed to help members better understand how these schemes can be relevant to them, and how they can access these schemes for themselves and/or for their organisations. The Navigator is online and also published in this issue.


Stella Lau is Manager, Insights and Publications, ISCA.