Edwin Tong: Property is not an accurate measure of wealth
Edwin Tong, MP for Marine Parade GRC delivered a factual account on how means testing can be unfair for citizens. This article is adapted from his speech.
Welfare, benefits, discounts, rebates, government transfers and all the other government handouts we see in Singapore are measured by this thing called “means testing”. It is the way a government body decides whether or not you’re deserving of an assistance…whether or not you have the “means”.
Part of the component of means testing, the the Annual Value of your property.
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.
Because of that – means testing needs to be adjusted.
One of the key assessment criteria, is the Annual Value of the home. HDB dwellers receive on average about 4x the amount of Government transfers when compared to private estate dwellers.
Here are some of the support programs that is affected by the Annual Value of the home:
Silver Support Scheme
Workfare Income Supplement
U-Save vouchers and S&CC rebates
Elder day care subsidies
“…Annual Value of home has become too much as a simple surrogate for assessing eligibility,” said Edwin. In short – the Annual Value is not an effective measure of wealth.
Whilst the ability to afford private housing may be a general indicator of wealth, this is unfair to a number of residents – especially elderly ones, those with no income and savings.
6.5% of households in the lowest 10% (of monthly household incomes) lived in private property. The landed properties on which they live tend to be old and ill-maintained, and their elderly inhabitants usually struggle with day-to-day expenses.
For this group of residents – their private and landed houses are not indicators of wealth, merely a home where they have lived their entire lives. They probably acquired their houses many years ago, on very modest income, but could never dream of being able to buy them today.
These are our asset rich, but cash poor residents. Whatever wealth they possess is almost entirely locked up in their property and cannot be utilised.
What then would be the government’s response? To ask them to sell their houses.
But it would not be realistic to ask these folks to sell their property. They are at an advanced age, it is difficult for them to acclimatise to a new environment. They have a routine, a supportive community and an eco system that they have rooted themselves into.
The means testing system is also blind to the fact of whether or not you own the property.
Simply said: even if you’re just renting (even just one room in a house) or squatting at a friend or relative’s house on goodwill, you are also considered ineligible for government programs.
Low bar for Annual Value
Also, the bar for Annual Value is set very low. Any property which can fetch at least $1100 per month would not qualify. Put simply, based on 2016 statistics, only 1 or 2 room HDB last would qualify.
The Annual Values of properties are adjusted from time to time, pegged to the market, but with no correlation to a person’s income levels.
Different households different problems
There is little consideration of the particular financial demands of a household. Each household is different and should be considered differently. Perhaps what might look like a decent income, might have several generations living in it. Elderly parents whom require medical care, as well as children whom needs childcare.
Some households have elderly members whom have long term chronic cases. Some families, which because of no or insufficient assistance rendered at the right time, then fall into the cracks and their troubles snowball into acute difficulty.
Chan Chun Sing, when he was Minister at the MSF once said that the critical challenge is how to ensure that today’s middle income will not end up as tomorrow’s bottom. Chan said that we have to help the “temporary poor, those who for different reasons fall into hardship”.
Edwin Tong then left the House with a quote from The Guardian:
“means 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.”