Are BR1M cash hand-outs effective?

Prime Minister Najib Tun Razak announced the allocation of RM4.6 billion to benefit 7.9 million recipients under the BR1M programme during the tabling of Budget 2014 on Oct 25.

The changes in the new BR1M packages have given eligible households good reason to cheer as these changes include increasing the hand-out amount, and a new hand-out of RM450 for the previously omitted medium-income group – those earning between RM3,000 and RM4,000 amount.

The facts on BR1M 2014

• BR1M to households with a monthly income of below RM3,000 will be increased from RM500 to RM650.

• For single individuals aged 21 and above and with a monthly income not exceeding RM2,000, BR1M will be increased from RM250 to RM300.

• In short, all BR1M households recipients with a monthly income of not more than RM3,000 will enjoy financial assistance of RM700.

• For the first time, BR1M assistance of RM450 will be extended to households with a monthly income of between RM3,000 and RM4,000.

Apart from the BR1M programme, there are also tax-related measures announced to help the middle-income tax payers. This include special tax relief of RM2,000 to be given to middle-income tax payers with monthly income up to RM8,000, as well as, the broadening of the income tax structure by lifting the maximum chargeable income bracket from RM100,000 to RM400,000.

There will be an overall reduction in tax by 1% to 3% across all taxable income brackets. However, this has little or no impact at all on the lower-income group, as they are exempted from paying income tax.

And with the anticipation of the goods and services tax (GST) to be implemented 2015, and the rising inflation rate, the cash hand-out is timely.

Economists expect inflationary pressures to rise on the back of further reduction of fuel subsidy and the immediate removal of sugar subsidies.

Given that transportation costs make up 14.9% to the consumer price index (CPI), economists expect the hike to see a rise in inflation. Consumers are already feeling the pinch of higher cost of living.

Views from the ground

Therefore it came as no surprise that most of the recipients contacted by iMoney said that the government cash assistance, to an extent, do help households to weather rising costs. Most of the recipients utilised the BR1M cash hand-outs to pay utility bills, and buy groceries.

Arief Jalal Kurniawan, 30, who was recently married and single mother Josephine Chong, 52, said that although the cash hand-out has helped them, a one-off payment yearly is not enough to alleviate rising costs.

“I spent the RM500 on essential things like food. In fact, the amount was so low that I just spent it buying food in less than a week,” said Chong.

Though, interestingly, there are those who plan to use the cash hand-out for discretionary purposes, such as purchasing a karaoke box.

Meanwhile, there are recipients who say they can do without the cash assistance. This includes Lim Yang Sing, 22, currently doing his internship.

“The hand-out is just somehow a small bonus for me, I can do without it,” said Lim who uses his last BR1M cash hand-outs on necessary daily expenses.

In cases like Lim’s, it raises a question if the BR1M cash assistance is effective in alleviating the rising cost of living against the backdrop of the federal government tightening fiscal budget.

Economists say the federal government debt is still forecast to rise to 54.8% by the end of 2013 and our current account surplus is expected to narrow further.

It is important therefore that in the near term the government manages its expenditure meticulously and is agile enough to adjust for unforeseen events in a potentially volatile global economy.

education for the low income rakyat. Nonetheless, economists say the government has correctly prioritised fiscal consolidation; restraining expenditure while being prudent with income expectations for 2014.

As not many are eligible for the BR1M hand-outs, the public can check if they are eligible for it or any other incentives post-Budget 2014 using iMoney’s Budget Calculator. The calculator is created to help Malaysians get an idea on how much they can gain (or lose) based on the latest Budget 2014.

Be as it may, recipients of BR1M contacted by iMoney have a few suggestions on how the government could further help the low and middle-income rakyat other than cash assistance.

This includes promoting higher interest rate on savings for low income individuals and fresh graduates and giving the privilege for first timer purchases on car and house.

There are also suggestions that the government to undertake a “talent search” to address the brain drain in the country.

 

* Article was first published on Free Malaysia Today.