About a week after the Republic unveiled a Budget that was hailed by various quarters for its generosity and far-sightedness, several Members of Parliament (MPs) yesterday raised concerns about the Government’s fiscal sustainability, given that the projected spike in social spending coincides with a moderating economy.
An ageing population would also mean less revenue that could be derived from taxes, they added, stressing that the Republic’s healthy reserves should not be taken for granted.
In all, 25 MPs rose to speak during the first day of the Budget debate. Apart from concerns about fiscal sustainability, MPs generally welcomed Budget measures such as the SkillsFuture initiatives and the Silver Support Scheme, and offered suggestions on the implementation of the new programmes. They also highlighted the continuing struggle among businesses to raise productivity, but stressed the need to stay the course.
The introduction of more social safety nets and other measures to mitigate social inequality prompted Workers’ Party chairman Sylvia Lim to observe a “leftwards” shift.
In particular, she said the Silver Support Scheme — which gives cash payouts to needy elderly — came as a surprise to most. “It embodies what the People’s Action Party government has always eschewed — having any form of rights-based, ‘defined benefits’ welfare scheme,” Ms Lim said. “Up to now, government assistance schemes were usually temporary and subject to continuous means-testing and conditions, with applicants needing to fill up forms and provide documentary proof of illness and family income.”
She added: “This Budget explicitly talks about strengthening social safety nets. This suggests a shift to the left, a direction which I believe is right … A shift left does not necessarily undermine economic performance, but could well enhance it.”
Holland-Bukit Timah GRC MP Liang Eng Hwa said the Budget signalled a further shift to the left, but this was possible only because “over the past 50 years, we have built a stronger and more sustainable financial position through careful budgeting and sheer discipline”.
Still, Nominated MP (NMP) Chia Yong Yong urged prudence, quipping: “If we lean too much to the left, we will not have much left.”
Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam announced during the Budget statement last Monday that Temasek Holdings will be included in the Net Investment Returns (NIR) framework — joining GIC and the Monetary Authority of Singapore — so part of its projected long-term returns can be spent. Personal income taxes for the top 5 per cent income earners will also be raised. With these moves, the MPs felt the Republic has seemingly exhausted ways to boost its coffers, without raising taxes for the masses.
West Coast GRC MP Foo Mee Har noted that this year’s budgeted expenditure was 19 per cent higher than that in the previous year.
“While it is assuring to know that these expenditures can be provided for from current reserves accumulated since 2011, it appears that we have come to rely more and more on past reserves to fund our spending, and have now resorted to including Temasek in the NIR framework to make ends meet,” she said. “How will we know when we have gone too far, when we have crossed the line in fiscal prudence — that tried-and-tested principle that has seen Singapore through many economic crises?”
Distributing a table showing figures from the Ministry of Finance, Bishan-Toa Payoh GRC MP Hri Kumar Nair pointed out that if Singapore had not been drawing from its reserves via net investment income contributions, it would have run up “large deficits for a number of years”.
Noting that government expenditure will continue to rise, he warned: “We are running out of levers to pull. After Temasek, there is no next.”
He added: “Increasing taxes on the top 5 or even 10 per cent will get you only so far, and there will be considerable pressure on the Government not to raise taxes for everyone else … There will no doubt be calls on the Government to raise the NIR contribution beyond 50 per cent, but that means leaving behind less for our children, so where do we go from there?”
Mr Liang suggested that the Government regularly review the country’s fiscal sustainability, with additional scrutiny and oversight on spending programmes that last longer than 10 years.
With the economy moderating, NMP Randolph Tan said, ultimately, the fiscal strength to fund more social programmes would have to come from strong economic growth. “Singapore has to be cautious and prepare for the possibility that — unlike resource-rich and larger economies —slower growth may not turn out to be the idyllic experience we imagine,” he said. “By simultaneously drawing on surpluses, proposing a deficit and announcing a surprise rise in taxes on the wealthiest, this Budget gives us a glimpse of the stark realities we face.”
The Budget debate continues today.