I tried this pitch last year, and will try again this year. But this year, with even more minutes added to my clock.
1. Not everyone who lives in a private estate is financially independent and self-sufficient. Many of them, especially retirees and elderly singles, need some measure of financial assistance even if they may at the same time live in or own a private property.
2. If we accept the above proposition as being correct, then something has to be done about the way in which we means test and administer assistance and social transfers.
3. One of the key assessment criteria in any means tested assistance program is the Annual Value of the home.
a. For instance, the Silver Support Scheme : this is only for HDB dwellers, with the amount of payout dependent on the HDB flat type.
Likewise U-Save vouchers and S&CC rebates – only applicable for HDB dwellers.
b. Take the Workfare Income Supplement : to even qualify, applicants must be staying (not owning) in a property not exceeding $13,000. Likewise for Specialist Outpatient Clinic (SOC) Subsidies and Foreign Domestic Worker (FDW) Grants which all look at AV as part of the eligibility criteria.
The Workfare scheme has been part of our social safety net since 2007. It is meant to incentivise less-educated Singaporeans in the older age group to enter and stay in the workforce.
Why then should this turn on what type of housing the applicant stays in, as long as the other income criteria are met?
It suggests to me that that AV has become too much as a simple surrogate for assessing eligibility. However, the Annual Value is not an effective measure of wealth.
4. In a publication by the Department of Statistics, Singapore titled “Key Household Income Trends (2016)”, HDB dwellers receive on average about 4 times the amount of Government transfers when compared to private estate dwellers in 2016.
5. I am not against using assessable income and AV as indicators. We have to start somewhere, to get a baseline.
6. But I believe we can, and should, do more to refine our means testing criteria, so that it is no longer a blunt and ineffective tool. It may be simple to administer, but it is not equitable.
7. The Annual Value is not an effective or fair measure.
a. First, whilst the ability to afford private housing may generally be indicative of wealth, this undoubtedly includes a fair number of residents, especially elderly ones, who have no income and little savings.
b. In fact, the report on Key Household Income Trends in 2016 found that 6.5% of households in the lowest 10% (of monthly household incomes) lived in private property.
c. The landed properties on which they live tend to be old and ill-maintained, and their elderly inhabitants usually struggle with the day-to-day expenses.
d. For this group, their private or even landed houses are not indicators of wealth, but simply a home where they have lived their entire lives. They probably acquired it many years ago, on a very modest income; but could never dream of being able to acquire it today. They are the classic asset rich but cash poor residents. Whatever ‘wealth’ they possess is almost entirely locked up in their property and cannot be utilised.
e. It would also be unrealistic to ask these persons to cash out and sell their property, and be uprooted from their daily routine, their communities, and way of life. At an advanced age, it would be difficult for them to acclimatize to a new environment.
8. Second, in the means test, the criteria for Annual Value applies irrespective of whether the resident actually owns the property or not. Let me repeat : irrespective of whether they own the property or not.
a. a person may be renting a home, or maybe even just one room in a house or apartment.
b. or he may just be squatting at a friend or relative’s apartment on goodwill terms.
In all of these cases, this person would not qualify for social assistance programs which consider as one of their means criteria the type of dwelling home. But surely we agree that renting a small private apartment, or room, does not automatically mean that that person is financially better off than a HDB owner? In fact, probably worse off. This is a serious flaw in the assessment criteria.
9. Third, an Annual Value of $13,000 is not high. Leaving aside the fact that $13,000 Annual Value is a hypothetical value which cannot actually be realised, the bar is also set very low. $13,000 Annual Value means that any property which can fetch a market rent of at least $1100 per month would not qualify. Based on the 2016 Q4 median rental statistics, only 1 or 2 room HDB flats would then qualify. In other words, if a resident lives in a property where the Annual Value is higher than a 1 or 2 room HDB flat, he or she would not qualify for the program. This leaves very little room.
10. This comes on top of the fact that the Annual Values of properties are adjusted from time to time, based on market movements, but with no correlation to the person’s income levels.
11. Fourth, there is little, if any, consideration of the particular financial demands on the household in question. Each household is different, and should be considered differently. What might be decent household income for a family of three or four would be very different for a multi-generational household with elderly parents and in-laws in need of medical care, as well as young children in school. So we have to look beyond assessable income alone, and consider dependents, and individual circumstances, as well.
12. Some of these cases could be long term chronic cases. But there are others which could be short term, caused by a sudden catastrophic event like a loss of a key family breadwinner, or loss of a job, or a sudden acute need for medical care. These are not unlikely scenarios, but our mean testing criteria simply does not respond well to them.
13. Consequently, there are families which, because no or insufficient assistance is rendered at the right time, they fall into the cracks, and into acute difficulty. To take a leaf out of Minister Chan’s ethos when he was at MSF, the critical challenge is how to ensure that today’s middle income will not end up as tomorrow’s bottom. To do that, our financial assistance and social transfers must be more nimble and adept. Again, in Minister Chan’s words – we have to also help the “temporary poor, those who for different reasons fall into hardship”.
14. In closing, I leave this House with a quote from The Guardian, written in January 2013, which perhaps best sums up the dilemma we find ourselves in :
“[m]eans testing hurts people who are neither very rich or very poor. Because there’s always a cut off point, some who are far from well off and who would “genuinely” benefit from them are excluded. There are also many people who may seem comfortable to the outside world, but who don’t necessarily feel so themselves. So they are frugal for fear of rainy days, not realising that the rain has already come.”