SINGAPORE: Singapore does not need an independent fiscal council because the country continues to be fiscally prudent, Minister in the Prime Minister's Office and Second Minister for Finance Indranee Rajah said on Friday (Feb 26) in response to a suggestion from Workers' Party MP Jamus Lim.
Associate Professor Lim (WP-Sengkang) had proposed setting up an independent fiscal council to evaluate all major policy proposals by the Government and Members of Parliament for budgetary implications. The cost of setting up the office was estimated to be S$20 million.
Such fiscal councils can provide public assessments of fiscal plans and macroeconomic and budgetary forecasts, and it may be relevant now following an "unprecedented deficit over the last term of government", said Assoc Prof Lim.
Ms Indranee, who is also Second Minister for National Development, said that the bulk of independent fiscal institutions established in other countries were set up in the aftermath of the global financial crisis in 2008-2009. Their main purpose was to prevent future fiscal crises, she added.
"In those cases, fiscal rules had proved insufficient to ensure prudent management of the public finances before the crisis," she said in the Ministry of Finance's Committee of Supply debate.
"The context in Singapore is very different. The ills which led to the need for IFI’s in other systems are not present in our system and we continue to keep a very strict eye on our fiscal prudence."
READ: Singapore should strive to remain fiscally prudent amid highly uncertain global outlook: DPM Heng
She added that Singapore is among a small number of countries today that have an AAA credit rating and the Government has run balanced budgets in each term of government, barring major crises.
"We have put in place a strong system to scrutinise spending and debate budgetary matters, without incurring the costs of setting up additional fiscal monitoring institutions," she said.
"More importantly, the Government has been upfront about the hard choices that we make on budgetary matters."
It has not shied away from highlighting the need to raise GST to meet the longer-term increase in healthcare and social spending costs, she said.
READ: Budget 2021: Expected deficit of S$11 billion; Government to draw on reserves for 2nd straight year
"Robust, intellectually honest analysis is important, to foster more informed parliamentary debate. But ultimately, there is no substitute for having the political courage to make difficult budgetary choices," she added.
She pointed out that the setting up of independent fiscal institutions in other countries did not solve their fiscal issues.
"Ultimately we cannot outsource honest and upfront debate. We should focus our time and our energy on having robust, honest, constructive debates deciding on the trade-offs and not delegate the responsibility," she said.
Following Ms Indranee's speech, Assoc Prof Lim asked if a second opinion on the country's fiscal prospects would be valuable in the future given the changing macroeconomic and fiscal environment.
Reiterating that Singapore's situation is different from that of other countries, Ms Indranee said that the Office for Budget Responsibility in the United Kingdom has been criticised for overly optimistic forecasts.
"A second opinion does not always settle the issue," she said.
Assoc Prof Lim also pointed out that an independent fiscal council would not purely be a constraint on the Government, and could comment on proposals by all MPs.
To this, Ms Indranee replied: "In essence, what the learned member is actually asking is for this council to serve the opposition members because the PAP members are not asking for this and the Government does not need it.
"So effectively it's a request for a S$20 million fiscal council to assist the opposition members with their proposals."
READ: Green Plan seeks to create new jobs, make use of sustainability as 'competitive advantage' for Singapore
In response to questions by MP Desmond Choo (PAP-Tampines) on supporting social and environmental outcomes through funding and corporate regulatory levers, Ms Indranee said that the Government has more than doubled spending in these areas over the last decade.
Singapore recently launched Green Plan 2030 which charts the country's green targets over the next 10 years.
For environmental outcomes, Singapore has one of the lowest carbon emissions per dollar of GDP in the world, Ms Indranee said.
"Building on this, we are working towards peaking our emissions around 2030, and achieving our long-term net-zero aspirations as soon as viable," she added.
READ: Singapore's push for green infrastructure bonds will spur private sector into action, say experts
Commentary: Here's how green bonds will take Singapore's reputation as a finance hub to the next level
However, there are still areas of improvement, such as the domestic recycling rate, which the Government hopes to increase to 30 per cent by 2030, she said.
MP Henry Kwek (PAP-Kebun Baru) asked about plans to develop Singapore into a green financing hub, to which Ms Indranee said that green finance will be an important enabler of the Singapore Green Plan.
As part of its Green Finance Action Plan, the Monetary Authority of Singapore has convened an industry-led taskforce to work on the approach for a green and transition taxonomy, said Ms Indranee, adding that this should be completed on Mar 11.