Timing of water price hike more synchronised to political than economic cycle, says WP

The opposition politicians also call for a more in-depth explanation from the Government on water pricing methods, while voicing concern over the impact on costs of living.
Channel NewsAsia 28 Feb 17;

SINGAPORE: The opposition Workers’ Party (WP) on Tuesday (Feb 28) questioned the timing and impact of the 30 per cent water price hike announced as part of Budget 2017 last week.

Non-Constituency Member of Parliament (NCMP) Leon Perera suggested that recent Budgets from the ruling People’s Action Party (PAP) Government trended towards “racking up a surplus in the early part of the Parliamentary term and then incurring deficit spending towards the end of the term close to the General Election (GE)”.

Mr Perera said the timing of various price hikes seemed “more synchronised to the political cycle than to the economic cycle”.

“Is this the right time to raise the electricity tariff? The gas price? Parking fees? Diesel usage costs? And last but not least, to raise the water price?” he asked.

“Hitting the economy with these multiple price hikes within the space of a few months may make good political sense, because people have three years to forget them before the next General Election. But do they make good economic sense?” he said.

“Why introduce all these price hikes now at a time of economic fragility, when they could tip some SMEs (small- and medium-sized enterprises) at the margins over the edge, when they increase the hardships faced by Singaporeans beset by job market insecurities? Why not introduce some of them later when there is an upswing in external demand?”

HOW DOES THE GOVERNMENT PRICE WATER?

MP for Aljunied GRC Pritam Singh called for “a deeper explanation from the Government about how it prices water”. “Can the Government also share how much it costs each desalination and NEWater plant to produce water today, especially since some of these plants operate on a private-public partnership basis? How do they compare with plants run directly by the PUB?” he enquired.

He then asked if the falling water levels in Malaysia’s Linggiu Reservoir had an impact on the water price revision, “especially since the Government’s position as late as 2013 confirmed no need to raise water prices”.

Mr Singh said he wondered if the reservoir’s water levels dipping to zero per cent would result in another rise in water prices. “That would also prompt a corollary question as to whether the latest water price revision was set with a view to account for the complete failure of the Linggiu Reservoir,” he added.

“KNOCK-ON EFFECTS ON COST OF LIVING”

NCMPs Dennis Tan and Daniel Goh both expressed fears over the water price hike having an impact on the cost of living.

Speaking in Mandarin, Mr Tan said: “The companies and industries affected most would be those in F&B. How can the Government ensure the rise in water tariffs will not cause prices to increase in hawker centres, coffeeshops and other products as well?”

Mr Tan added that he was concerned by the volume-based duty of S$0.10 per litre on diesel.

“I can understand the pollution reasons but I question if it’s wise to time it now when the present economic situation is not healthy,” he said. “Can the Government assure the people that transport costs of taxis and buses etc will not increase?”

“Although the Government has announced GST vouchers to give some rebate to some families, most Singaporeans, industries and companies will not fulfil the criteria and not receive anything, or else just a token rebate,” he argued.

Meanwhile, Associate Professor Goh described the water price hike as “ominous” as he urged the Government to strengthen safety nets for middle-income households in particular.

“The 30 per cent hike in water price and the carbon tax when implemented will have knock-on effects on the costs of living, as all areas of everyday life are affected by the use of water and electricity,” he said.

“Middle-income households do not have the benefit of the enhanced financial transfers to low-income households to soften the impact of the water price increase … (They) will feel the head-on impact of the increase in costs of living most strongly.”

High-income earners will also be subsidised many times more than middle-income workers when it comes to the Personal Income Tax Rebate of 20 per cent, capped at S$500, said Assoc Prof Goh.

Earlier, Mr Perera said Budget 2017 had “not made a decisive shift towards building local enterprises as an engine of value creation alongside MNCs and GLCs” and this was a "huge missed opportunity” he said. “We also … can and should do more to enable our students to understand how entrepreneurship is both a viable and a socially meaningful calling. Right now, I fear that most aspiring students dream of becoming civil servants or working in an MNC.”

He also said Budget 2017 initiatives did not do enough to foster risk-taking. “It is no coincidence that the countries with the most innovative companies and disruptors are also the countries that have a larger role for social safety nets and risk pooling,” he said. “We must create enough security and confidence for Singaporeans to become the disruptors and not the disrupted.”

“While we do recognise the positive moves in Budget 2017, we question the timing of some of the measures that will raise costs as well as their necessity and justification,” Mr Perera concluded. “We question whether more can be done to support a beleaguered economy.”

“And above all, we question the missed opportunities to make decisive, bold moves in local enterprise development, risk-pooling and education to pivot Singapore towards truly finding its place in the sun in the 21st century.”

- CNA/jo


WP questions need for water price hike
SIAU MING EN Today Online 1 Mar 17;

SINGAPORE — Workers’ Party (WP) Members of Parliament yesterday questioned the decision to raise water prices, calling on the Government to thoroughly explain how the impending 30 per cent hike was calculated. They also suggested that the timing was “political” to avoid having to raise prices when elections draw near.

Speaking in Parliament yesterday during the debate on the Budget statement, Mr Pritam Singh (Aljunied GRC) raised a slew of questions, seeking to “understand the decision-making processes” behind the increases.

“I believe a deeper explanation from the Government about how it prices water and its long-run cost imperatives would enable the public to better understand and rationalise this water price hike, in addition to improving public understanding of this issue,” said Mr Singh, who noted that the water price hikes came on the back of other municipal price increases. These include the increases in HDB car park charges, higher electricity tariffs, and higher service and conservancy charges — all within the last three months.

Last week, Finance Minister Heng Swee Keat announced that water prices would go up by 30 per cent in two phases, in July this year and July next year. Noting that water sufficiency is a matter of national survival, he said the authorities have priced water to reflect the higher costs of desalination and NEWater production “because every additional drop of water has to come from these two sources”.

PUB has also said that the total water price is pegged to the long run marginal costs of water supply — on which Mr Singh pressed for more details, asking how PUB calculates the components of these costs and assesses when water prices should be raised.

Turning to the time period used for its projections, Mr Singh also questioned if the authorities are looking at the expiry of the water agreement with Malaysia in 2061, or when Singapore’s water consumption is expected to double, for instance.

He also asked if the record low levels in Linggiu Reservoir — which enables Singapore to reliably draw water from the Johor River to meet half of its water needs — were a factor in deciding to raise prices.

Instead of solely relying on water pricing to promote conservation, Mr Singh suggested that the Government turn to creative pricing strategies, such as lowering taxes for those who use less water.

WP Non-Constituency MPs Leon Perera and Dennis Tan also questioned the timing of the water price hikes, with Mr Perera suggesting that the timing of the recent price hikes “seem more synchronised to the political cycle than to the economic cycle”.

“What is the justification for these price hikes and their timing? Hitting the economy with these multiple price hikes within the space of a few months may make good political sense, because people have three years to forget them before the next General Election,” Mr Perera said.

Even with U-Save rebates to cushion the hikes, Mr Tan said there would be firms, such as those in the food and beverage industries, that will be affected. This could have an adverse “chain effect” that leads to increases in the cost of living.

Mr Lim Biow Chuan (Mountbatten) urged the Government to “consider a stay on water price increases” for this year amid the uncertain economic situation. Due to “rumour-mongering”, many people have been caught up with the impending price hike that they forgot about the measures introduced to mitigate he price increase, he said.

East Coast GRC MP Lee Yi Shyan called the hike a “necessary and small insurance”. While Singapore was subject to the same dry season as neighbouring Malaysian states last year, it did not have to resort to water rationing, said Mr Lee, who was formerly Senior Minister of State for National Development and Trade and Industry.

“The belated 30 per cent hike, put in context, is a necessary and small insurance compared to the hundreds of millions of dollars we need to set aside for future water plants and infrastructure,” he said.

Meanwhile, Nee Soon GRC MP Henry Kwek called on the Government to monitor the effects of the fee hike on individuals and businesses, to see if further tweaks are necessary. ADDITIONAL REPORTING BY KELLY NG



Budget 2017: Defer water price hike, relook help for middle class, say MPs
Lianne Chia Channel NewsAsia 28 Feb 17;

SINGAPORE: The water price increase and helping the middle class cope with the rising cost of living were among the issues brought up by Members of Parliament (MPs) on Tuesday (Feb 28), the first day of Parliament’s debate on the Budget statement.

MPs also pointed out the need to relook the Government’s approach of looking at home type as a measure of determining the distribution of grants and support.

"DEFINITELY NOT A GOOD TIME" TO INCREASE WATER PRICES

In his speech, MP for Mountbatten Lim Biow Chuan asked the Government to consider a stay on the water price increase for this year. In his Budget statement, Finance Minister Heng Swee Keat had announced that water prices would be increased by 30 per cent in two phases over the next two years.

While Mr Lim noted that “there is never a good time” to raise the prices of utilities, it is “definitely not a good time”, given the economic uncertainty.

He pointed out that the price increase appears to have distracted many Singaporeans from “much more important messages”, like how to plan for one’s future, and the fast-changing world.

“Water is critical to our survival and we need to take adequate measures to conserve water, but sadly, the 30 per cent increase in prices seems to have distracted from the main intent of the Budget,” he said. “And due to rumour-mongering, many people seem to have been so caught up and concerned about the increase that they seem to have forgotten or ignored the various other measures the Government has introduced to help mitigate the price increase.”

He added that if it is not possible to defer the price increase, he hopes the Government can ensure that businessmen do not profiteer from it. One way they can do this, he said, is to set up a committee against profiteering, similar to the one that was set up when the GST was raised.

MP for Nee Soon GRC Henry Kwek also spoke about the water price increase and its impact on the cost of living, adding that he has seen the water bills of some hawkers in his constituency.

“I saw the bill for an entire coffee shop with six stalls. On average, each stall is using about 50 cubic metres of water a month, which costs around S$100,” he said. “With the new water tariff, each stall will see an increase of around S$30 a month.”

From this, Mr Kwek noted that it is unclear if the water price increase will lead to a significant increase in the cost of living. Nevertheless, he called on the Government to continue monitoring the situation to see if any further tweaks are necessary.

The issue was also brought up by Workers’ Party MPs, with Non-Constituency MP Leon Perera commenting that the timing of the water price increase was “more synchronised to the political cycle than the economic cycle”.

HOME TYPE SHOULD NOT BE PROXY FOR MEASUREMENT OF WEALTH

MPs also raised concerns about middle-income Singaporeans and retirees who may not benefit from the support measures outlined in the Budget.

“Our current approach uses size and the value of housing type as the primary factor for qualification,” MP for East Coast GRC Jessica Tan said. “The criterion is also not based on ownership but the type of housing you live in.”

“While logical, this may no longer be as valid or accurate, as there are some living in HDB flats who may be more well-off than someone living in a private property.”

Mr Lim pointed out that there are professionals, managers, executives and technicians (PMETs) living in condominiums and five-room flats, as well as retirees who live in private homes which they bought after saving for many years.

He explained that these retirees have to rely on their savings or their children to provide for them, while the income of PMETs is unlikely to rise due to wage freezes in many companies. Yet, this group may not benefit from many of the support measures in the Budget, he added.

“They feel they have been left out in this Budget,” he said. “They feel penalised simply because they were trying their best to live their aspirations in the past."

“I urge the Government to consider ways in which we can allow the retirees and middle-income Singaporeans to share and enjoy the growth of the country and move forward as a nation,” he said. “We should find more equitable ways to share and redistribute the country’s wealth, rather than relying on home type as a proxy for measurement of wealth.”

Ms Tan made a similar point. While she stressed that she is not asking to increase the number of people receiving help, she said there is a need for the Government to relook the distribution of subsidies to ensure that “those who do need help are able to receive it”.

MP for Ang Mo Kio GRC Darryl David made a similar suggestion in relation to the increased CPF Housing Grant. It was announced in Budget 2017 that first-timer couples looking to buy a resale flat will now get higher grants, which are pegged at S$50,000 for those who buy four-room or smaller flats, and S$40,000 for couples who buy five-room or larger flats.

Mr David said he appreciated the rationale that the Government would not want to provide too much in subsidies for those who buy bigger flats, as they are likely to be from a higher income group. But he said it cannot ignore that some higher-income consumers may choose to purchase a more expensive four-room flat due to its location, age and other factors.

“Conversely, some consumers with a lower income might have to purchase a five-room flat, as opposed to a more expensive four-room flat in other locations due to their family requirements,” he added.

Instead, he suggested that the Government provide a percentage grant based on the purchase price of the flat. “This amount would be subject to an absolute ceiling amount, and whichever amount is higher would then be given to the qualifying purchaser as the housing grant,” he said.

Mr David also expressed his hope that the Government could review its existing assistance schemes from time to time so that it can remain responsive to people’s needs. To that end, he suggested that the Government consider setting aside an escrow fund held by a statutory board or ministry, and allow them to implement a one-off support scheme whenever the need arises.

“This would give the Government an additional channel to remain responsive to rising cost and potential hardship that Singaporeans might face,” he added.

- CNA/lc

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