Water price hike: Govt has to do 'right, responsible thing' in sending price signal, says Heng Swee Keat

Water price hike: Govt has to do 'right, responsible thing' in sending price signal, says Heng Swee Keat

The Finance Minister rounds off three days of Budget 2017 debates by addressing the concerns raised on the water price hike and Government expenditure.

SINGAPORE: The Government has to do the "right and responsible thing" when it comes to sending the right price signal on water consumption, Finance Minister Heng Swee Keat said on Thursday (Mar 2) in response to questions from the Workers’ Party (WP) on the timing of the 30 per cent increase announced at Budget 2017 last week.

WP members had raised this repeatedly in three days of debate and Non-Constituency Member of Parliament (NCMP) Leon Perera sought clarification again after Mr Heng’s round-up speech.

“The Government did have the option of either pre-announcing and/or staggering or deferring (the price increase),” said Mr Perera. “Given the Government has shared that the reasons behind this are not political, can the minister help Singaporeans understand a little better what are the non-political reasons?”

Said Mr Heng: "The fact is, first and foremost, do we agree that the price signal is important so that consumers know what the actual cost of the resource is, and therefore can then take action to mitigate use?”

“If the answer is yes, then there’s never a good time. Because I don’t think any finance minister finds it a popular thing to come here and say, ‘I’m going to increase this and increase that’. I don’t take great joy out of announcing all these increases.”

“But … the right and responsible thing is to make sure the correct price feeds through to the economy early enough, and that if we do things early, often we also have the ability to provide the mitigation support package,” he added. “We’ve got to make sure we do things correctly.”

CARBON VS WATER?

Earlier, WP chair and Aljunied GRC MP Sylvia Lim said the reasons for the water price hike provided by Environment and Water Resources Minister Masagos Zulkifli were “longstanding” and “did not come up suddenly”.

“The last 17 years, the price has been unchanged. Did it not cross the Government’s mind before this year that it will want to raise the price of water?” she asked.

“By contrast, there is a two-year lead time for the impending carbon tax. Why was it not possible to prepare Singaporeans for an increase to take effect in July, with an announcement similarly two years ahead of time? Perhaps July 2015 was not a good time to make such an announcement,” she said, alluding to the general election in 2015.

Mr Heng replied: “The carbon tax is new and details have to be carefully studied. But the more fundamental point is whether Ms Lim agrees that water is of strategic significance and that we each should do our part.”

MP Christopher de Souza, who sits on the Estimates Committee, said the comparison between the carbon tax and water price hike was not a fair one, and that it was like comparing "chalk and cheese".

“They are completely different subjects. For carbon tax, you’ve got to look at our how commitment is corralled within the overarching Paris Agreement and how it impacts all members who’ve ratified that and therefore a longer runway is completely justifiable,” he said.

“Versus … a situation where water is precious, a commodity, scarce and we have to act promptly.”

REVIEWING GOVERNMENT EXPENDITURE

Ms Lim also asked whether the Government had done adequate reviews of past and current initiatives, to weed out wasteful or ineffective expenditures.

She highlighted that there had been previous initiatives similar to the Committee on the Future Economy (CFE). “In 2010, the Economic Strategies Committee’s (ESC) aim was to grow productivity by two to three percent yearly over a decade. Which should bring us to a 30 per cent productivity increase by 2019,” said Ms Lim.

“However, after seven years, productivity improvements are way off target and weak in domestically oriented sectors. What lessons have we drawn from here? And can these be applied to CFE strategies?”

Ms Lim then illustrated her point using the Productivity and Innovation Credit (PIC) scheme.

"The PIC is a huge scheme with the Government putting (in) billions in public funds. Do we know whether the results were worth the huge cost? As it turns out, millions of dollars were also sucked out of the system through fraudulent or dubious PIC claims. What lessons have we learnt from this? We now read that the SkillsFuture scheme - launched just last year - has also been subjected to a potential fraud of S$2.2 million already paid out."

“We’ve seen the productivity data that seems to be very mixed and weak in domestic sectors for the last couple of years. Can the minister elaborate further on whether there has been any publicly published Government report that shows the effect of PIC schemes on productivity?” she asked.

“In terms of productivity growth, over the period from 2009 to 2016, it has been above 2 per cent and within range of what ESC has set out to do,” said Mr Heng. “So these measures, in terms of productivity numbers, yes, have achieved that sort of outcome.

“That is why last year I spoke about why we need to move on to take more targeted measures, because we ought to engage in the next phase.”

DERIVING REVENUE SOURCES

Ms Lim further raised a point on whether the Government had "completely recognised its sources of revenue".

She said: “10 years ago, revenue from land sales was in the region of S$4 billion to S$5 billion. Today, we see revised land sales figures for this financial year to be S$11.8 billion, and projected for the coming year to be S$8.2 billion.”

“Tapping on land sales to fund annual budgets is internationally accepted and practiced by other governments,” said Ms Lim. “As our expenditures are expected to rise in coming years, is it not reasonable to seriously think about utilising land sales revenue to fund the Budget, and reduce the need to tax people further?

Mr Heng, however, explained that proceeds from land sales go into past reserves. “It’s because of this prudence that we are able to build up our reserves and we are now drawing a part of its returns for expenditure,” he said. “We must stay disciplined in spending returns of our reserves, so they remain a stable and sustainable source of revenue over the long-term.”

Source: CNA/jo

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