Left hand give you, right hand take back

We have all heard of the famous local words, “left hand give you, right hand take back”. Why is this so?

The quick answer: to neutralize the cost of living.

One of the roles of any Government, is to manage scarce resources and redistribute income for the better good of society. For the needy, lower percentile, a common approach by some Governments is to charge lower (even below cost). For example, water: if the price of water is $1.20 per cubic meter, the government could charge households with a monthly income of less than $1200 a discounted rate of $1 per cubic meter.

Let’s do this a little slower and observe:

  • Normal price of water (for example): $1.20 per cubic meter
  • If family income is less than $1,200: charge less.
  • Family now pays $1 and saves $0.20 per cubic meter
  • If family’s original bill was $30, the price off will now save them $5/month or $60/per year

There are two ways of helping this family:

a.) Give this family a price-off as painted above, or

b.) Give a handout of $60 credited to this family.

Option B is a better way of managing subsidies, for these reasons:

  • When a good is cheaper, people can be careless in it’s use and end up using more, possibly creating waste. By predetermining a price beforehand, the consumer would be careful with it’s use.
  • If the consumer does not use such large amounts of the good (in this case water), there is real money to assist him/her to pay for other things.

To use economic terms, this method of subsidy is more “efficient” (better at distributing public goods). So that is why in Singapore, we prefer to give cash and handouts rather than price-offs, food stamps, free transport and free healthcare.

GST credits is another good example of such a subsidy. The Government realizes that lower-income households should be relieved of paying GST, however, instead of creating a bureaucratic nightmare, direct cash is credited to us instead.

This is why we feel that while the Government is giving you money… they’re still taking back. Actually, the cash handouts are supposed to neutralize the rising cost of living… it is up to the individual to manage his/her spending responsibly, but how many of us actually went out and spent it all in one evening instead?

 

 

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About the author

Benjamin Chiang

Benjamin Chiang is an enthusiast of good advertising, deep thinking, labour issues and chocolate. He writes also at www.rangosteen.com and occasionally on Yahoo!

The views expressed are his own.

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4 Comments

  • I like the ‘attention grabbing’ titles of your articles like this one – left hand give you, right hand take back or Singapore has zero welfare etc… You have the most interesting titles for articles I have seen in all the sgp social political blogs, MSM like Straits Times etc should use headlines like yours, readership will certainly increase while conveying the same message to the sgp ppl.

  • Gosh, you are really buying into this stuff. If option A) was taken, there isn’t even a need to provide the subsidy. Do you know that it costs money to disburse money ? Do you know the number of families who qualify, but don’t receive the subsidies due to logistical and other reasons ?

    • Hello, well, likewise, if Option A) was taken, it would also cost money to reimburse the service providers. Moreover, it doesn’t answer the question of wastage, resource management and, we all know – once you give a subsidy, it’s very difficult to roll it back.

      I have encountered a few rare cases of individuals who qualify, but because of logistics didn’t get it (and eventually helped them to write in to CPF board etc). This is a terribly small handful – cause hey, if the government is giving out free money, few people would let logistics get in their way.

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