GST rate needs to go up because of government spending on healthcare: Lawrence Wong

SINGAPORE - Singapore needs to raise its goods and services tax (GST) rate because of necessary and unavoidable government spending on healthcare, said Finance Minister Lawrence Wong on Wednesday (March 2).

This is driven by the country's rapidly ageing population, where more seniors will live longer lives and require more medical care, he told Parliament in his round-up of this year's Budget statement.

In 2010, Singapore had around 10,000 people aged 90 and older. This figure has more than doubled to 22,000 today, and is set to grow further by 2030.

Older people require more medical care, including hospital stays - which tend to last longer for them than they do for younger people. They also need elective operations, such as cataract surgery, to help them live more fulfilling lives, Mr Wong said.

"Just the demographic effect of having more seniors alone will already push up healthcare spending significantly," he added. "Further increases will happen as better and more costly treatments become available, and with the medical inflation that is inevitable even with the best organised healthcare system."

While rising healthcare costs are the main driver of Singapore's social spending, there are other needs too, the minister said.

Social needs are getting more complex, with government agencies often having to tailor their approaches to meet the unique challenges faced by individuals and households. And funding is needed to ensure strong coordination between organisations within and outside the public sector, as well as to train people in the sector.

All these are highly resource-intensive and will invariably cost more, he said.

In his speech, Mr Wong also addressed statements made by Progress Singapore Party (PSP) Non-Constituency MPs Leong Mun Wai and Hazel Poa, who had urged the Government to spend less in certain areas.

"They have conveniently neglected to mention that they and the PSP have made requests on multiple other occasions for the Government to spend more," he said.

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"For example, funding of insurance premiums for MediShield Life (and) CareShield Life, hiring more teachers, reducing class sizes - all of which cost a lot of money. So you can't have it both ways."

Drawing a comparison with other developed economies, Mr Wong noted that Singapore runs an extremely lean and tight ship - and has managed to achieve good outcomes even so.

Government expenditure has gone up from 15 per cent to 18 per cent of Singapore's gross domestic product over the last decade, mainly due to spending on healthcare, public transport and social service programmes, he said.

"If we are able to keep government expenditure at 20 per cent of GDP in 2030... that would already mean a slowing of the rate of increase compared to a decade ago," Mr Wong added. "I think that would be a good achievement."

This article was first published in The Straits Times. Permission required for reproduction.