ECON 211: Compare and Contrast the Three Components of the GST Voucher: Public Economics Assignment, SMU, Singapore

Background

Exhibit 1: Quote from https://www.gstvoucher.gov.sg/Pages/Overview.aspx
“GST Voucher scheme was introduced by the Government in Budget 2012 to
help lower-income Singaporeans. The GST Voucher is given in three components – Cash, MediSave and U-Save.”

Exhibit 2: The table below zooms into the U-Save rebate and shows the policy changes and quarterly rebate amount since 2012.

Exhibit 3: In Budget 2017, the Minister of Finance announced a 30% increase
in the price of water (an increase for the first time in 17 years):
https://www.straitstimes.com/singapore/singapore-budget-2017-water-pricesto-increase-by-30-from-july-1-in-two-phases

Exhibit 4: In Budget 2020, Minister for Environment and Water Resources
announced subsidies for energy-efficient devices:
https://www.channelnewsasia.com/news/singapore/s-24-8-million-climate-friendly-household-package-for-1-to-3-12499846

Question 1

1. Compare and contrast the three components of the GST Voucher in terms of (a) delivery and (b) eligibility.

2. Why do you think the government has chosen particular eligibility and delivery combination for each of the three components? [1 short para for each of the three components]

Question 2 U-Save Voucher

1. What is your hypothesis about the effect of U-Save rebate on water conservation, and why? [1 paragraph]

2. Using an appropriate (demand and supply) diagram, depict the two policy
changes in

(a) 2017 hike in water prices, and

(b) 2017 hike in subsidy for 1/2 bedroom houses [whose rebate increase is enough to offset bill increase as in Exhibit 3] and the larger HDBs [whose rebate increase may not be enough to offset the bill depending upon the change in water consumption].

3. The U-Save voucher is an effort the Ministry of Finance (MOF) to address redistribution of income, whereas the Ministry of Environment and Water Resources (MEWR) would like to increase water conservation.

Imagine you are at the Cabinet meeting and you are the Minister of Finance. Minister of Environment and Water Resources has raised the issue of water conservation and has requested to revisit providing rebates to households.

How would you respond to your fellow Cabinet minister’s request:

(a) Would you remove the U-Save voucher? Why or why not?
(b) Would you introduce climate-friendly package (as in Exhibit 4)? Why or why not?