Parliament votes for amended motion on national reserves, rejects PSP motion to review fiscal policies
The Progress Singapore Party’s belief that Singapore has plenty of excess fiscal space is misconceived, said Second Minister for Finance Indranee Rajah.
Second Minister for Finance Indranee Rajah, Progress Singapore Party secretary-general Leong Mun Wai and Prime Minister Lee Hsien Loong spoke during a seven-hour debate in parliament on Feb 7, 2024.
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SINGAPORE: Parliament on Wednesday (Feb 7) rejected a motion from the Progress Singapore Party (PSP) to use more of the national reserves for the needs of the current generation of Singaporeans, while voting for an amended motion to ensure the government stays “fiscally responsible and sustainable”.
The amended motion passed after a seven-hour debate, in which 14 Members of Parliament, including Second Minister for Finance Indranee Rajah and Prime Minister Lee Hsien Loong spoke.
PAP MPs who were present in the House voted for the amended motion, while opposition members – PSP's Non-Constituency MPs and Workers’ Party MPs – voted against one of the amendments and the amended motion itself.
Initiating the original motion, PSP secretary-general Leong Mun Wai argued that there was no need to keep the size of Singapore’s reserves a secret, and that the reserves will continue to grow even if a larger proportion is allocated to reduce the financial burdens of Singaporeans today.
The motion states: “That this House calls on the government to review its current budget and reserve accumulation policies in order to help present-day Singaporeans reduce their financial burdens and improve their quality of life, while continuing to save for future generations of Singaporeans.”
Rising to speak near the conclusion of the debate, Mr Lee said that in the end, Singaporeans get to decide on the use of the reserves at the ballot box.
After explaining Singapore’s current system of using and preserving its national reserves, he said that this was the approach of the government in power, and he challenged opposition politicians to take the issue to the election.
”The PAP will join issue with them, and convince Singaporeans that our way is the right way for Singapore,” said Mr Lee.
In rejecting the PSP motion, Mr Lee asked: “How big a nest egg is enough? ... We can never say for sure how much is enough, because we do not know what kind of crises we will face in the future, or how our investments will fare.”
But this does not mean Singapore should “mindlessly save” every dollar earned without regard for present needs, he added.
“Instead, our mindset should be to treat past reserves as a precious resource that generations of Singaporeans have built up.”
Taking a long-term view of the reserves and striking the right balance between present and future needs - these are the vital responsibilities of any Singapore Government, said Prime Minister Lee Hsien Loong. Speaking in Parliament on Wednesday (Feb 7), he said that ultimately, in a democracy like Singapore, it is the people who will decide on big issues like the reserves. Mr Lee said the People’s Action Party (PAP) is convinced that this is the right approach. “As long as the PAP Government is in power, this is what we will do,” he said. “If any other political party thinks that this is not the right approach, if they truly believe that we should dip into our reserves more, then bring it to the ballot box, put it upfront, say you want to touch, you want to spend, you want to shift the rules. Do not pretend that you are just being as prudent, only more kind-hearted,” he said. “Campaign in the next General Election on this issue. Ask voters for a mandate to form the Government, change the Constitution, dismantle the second lock and key. Put this squarely to the people and let them decide,” said Mr Lee. He said the PAP will convince Singaporeans that its way is a right way for Singapore. He believes that Singaporeans have high confidence in the PAP Government's management of the reserves and is confident that it will win the argument, as well as get Singaporeans to do the right thing. “Now I am preparing to hand over to my successor in good order a Singapore which is more prosperous, more secure. I ask everyone to help them maintain the prudent policies that have served us well to keep Singapore on the right track so that we can all continue to benefit from the nation’s success for many years to come,” said Mr Lee.
Ms Indranee said she cannot support the motion because the wording suggests that the government has excess fiscal resources that are not being spent on Singaporeans.
“PSP’s belief that we have plenty of excess fiscal space is misconceived,” she said.
Contrary to PSP’s assertions, the money that Singapore puts into funds is not for “the far unknown future”, but are resources set aside to meet specific funding commitments that benefit Singaporeans today, she added, citing the GST voucher scheme as an example.
Setting aside this money when the government can gives Singaporeans the assurance that support will be available in the future and that they will not have to scramble to find the money only when it is needed, said Ms Indranee.
“This is prudent, thoughtful and responsible fiscal policy - not evidence of excess fiscal resources.”
Mr Leong argued that the cost of accumulating reserves is tolerable when the economy and incomes are growing rapidly, but at some point, the welfare of present-day Singaporeans could be hurt if the nation continues to accumulate reserves at the same rate.
“We are of the view that the Singapore of today has gone past that point,” he said, citing mental health issues and the declining fertility rate as social issues that have resulted from Singapore’s economic policies.
“Today, it is not unreasonable for Singaporeans to expect the government to focus less on accumulating reserves and do more with our financial resources to address these social ills.”
Ms Indranee said that Mr Leong has not recognised that when money is put in the reserves and invested by GIC, 50 per cent of the projected income goes back into the annual Budget every year, forming about 20 per cent of the total sum.
“When we say that we are investing in the reserves, we are not keeping that money away from Singaporeans. We are growing it and using it for Singaporeans,” she added.
At the current pace of accumulation, reserves growth will not greatly outpace economic growth, she stressed.
Singapore’s reserves have helped current and future generations of Singaporeans, said Second Minister for Finance Indranee Rajah. “We save our reserves, invest them and use the investment returns sustainably. If needed, we will tap on our reserves to help Singapore and Singaporeans get through exceptional crises,” she said in Parliament on Wednesday (Feb 7). Ms Indranee said the investment returns from the reserves provide a steady stream of income to supplement the Government's Budget. Singaporeans benefit directly from the reserves every year via the Net Investment Returns Contribution and during crises. At the same time, Singapore does not spend all its investment returns. Ms Indranee stressed that Singapore’s fiscal and reserve approaches are underpinned by the principles of fairness, prudence and sustainability. “While Singapore will always be a work in progress, and we are always striving to do better, the Government's fiscal and reserves policies have served Singaporeans well,” she said. Ms Indranee said given the significant uncertainties in the current geopolitical situation, Singapore must use its reserves wisely. “Our reserves give us confidence and give others confidence in us. In times of crisis, we become the harbour in the storm for many investors. We must and will continue to do right by Singaporeans, for Singaporeans. Doing right by Singaporeans is not just about meeting the needs of Singaporeans today. It is about looking after our children, grandchildren and generations of tomorrow,” she said. “As stewards of our reserves, we have the obligation to manage it judiciously, make refinements where needed so that it will continue to serve its purpose for Singaporeans today and in years to come,” she added.
The net investment returns contribution (NIRC) has kept pace with Singapore’s economy and remained stable at about 3.5 per cent of gross domestic product (GDP) – this trend is expected to continue, said Ms Indranee.
Noting that WP has previously disagreed with increasing the goods and service tax, she noted that the latest increases are needed in light of Singapore’s spending trends.
“We have to spend more in several key areas, and we will need the revenues very soon.”
The rules for spending have been enshrined in the Constitution, with 50 per cent spent for now and 50 per cent spent for the future, said Mr Lee in his speech, describing this as “fair and just”.
“It also happens to be the right, sustainable proportion to keep the reserves in proportion with the GDP,” he added.
Each generation must spend within its means, though this means that from time to time, Singapore will have to revise its taxes, said the Prime Minister.
LAND SALES PROCEEDS
Ms Indranee said WP chief and Leader of the Opposition Pritam Singh was mistaken in saying that the reserves will continue to grow steadily since proceeds from land sales go into the reserves.
“Land sales do not constitute revenue … suffice to say selling land does not generate new wealth,” she said, explaining the pitfalls of using land sales as revenue.
These include being reliant on property cycles, and having an incentive to keep land prices high.
Mr Singh contended that land can be resold as they have leases. However, Ms Indranee said that the use of the land has been lost for the time of the lease.
Meanwhile, PSP suggested that Singapore spend land sales proceeds by treating it as revenue divided over the period of the lease, she noted.
This is “not so different” from the government’s current approach, but the difference is that instead of spending that dollar of land sales proceeds directly, it is invested and half of the returns generated are spent, said Ms Indranee.
“Put very simply, under PSP’s proposal, you have S$1. Under PAP’s approach, the S$1 goes back, and you get more than a dollar.”
The proposal to treat land in Singapore’s reserves “as if it has no value” does not honour the sacrifice of those who gave up their land under the Land Acquisition Act, she added.
“Because their land, which did go into the reserves, means something to them, means something to us when we built on it, and you should not treat it as though it is worth nothing.”
Speaking on how Singapore’s sizeable reserves help the country stave off speculative attacks on the Singapore dollar, Mr Liang Eng Hwa (PAP-Bukit Panjang) proposed an amendment to the motion, which was debated along with PSP’s motion.
The amended motion read: “That this House calls on the government to ensure its budget and reserve accumulation policies always stay fiscally responsible and sustainable in order to help present-day Singaporeans reduce their financial burdens and improve their quality of life, while planning and providing for future generations of Singaporeans.”
The Government has tied up a lot of financial resources from the national Budget and in the reserves to the detriment of the financial well-being of Singaporeans today, said NCMP Leong Mun Wai in Parliament on Wednesday (Feb 7). Moving a motion on the issue, he said the resources should be deployed more fairly for present-day Singaporeans while continuing to save for future generations. Mr Leong said the Progress Singapore Party (PSP) had two proposals. First - consolidate surplus Budget or Net Investment Returns Contribution (NIRC) from the country’s financial reserves in an omnibus Budget surplus fund for future spending, instead of in various endowment and trust funds. Long-term expenditure needs should be funded each year directly out of this omnibus fund, and investment returns on the assets in the fund be retained there as well. Mr Leong said this will ensure that surplus Budget or NIRC resources will always be used promptly for Singaporeans’ immediate spending needs and unused capital will remain in the omnibus fund rather than being transferred back to the reserves. Parliament can also have better oversight of the fund and be in a better position to support tax increases if required. Second - Mr Leong reiterated PSP’s call to waive the land cost for public housing owned by Singaporeans for the purpose of occupancy under its Affordable Homes Scheme. This would eliminate the HDB deficit, release substantial resources back into the Budget and reduce the tax burden on Singaporeans, especially the middle class. PSP’s proposals do not reduce the past reserves, he said, though they might marginally slow down the future rate of accumulation - and Singapore has the fiscal space to do this as PSP estimates that the financial reserves stand at about S$1.2 trillion and growing every year. Mr Leong added that there was no need to keep the size of the reserves a secret when this can be derived from publicly available information; therefore, the Government should release official figures so as to facilitate proper discussion on taxation and spending policies.
WP MPs spoke in support of the original motion. Mr Singh said the government should be more open about the reserves and reveal figures not for its own sake, but to facilitate “mature conversations”.
The party has called for an increase in the utilisation of the NIRC beyond 50 per cent when needed, he noted.
“More saving is better, but only if we aren’t making undue sacrifices today,” said Associate Professor Jamus Lim (WP-Sengkang).
Singapore’s reserves are “not exempt” from the laws of economics, he added.
“When we’re told in a high-handed way that we cannot spend down our inheritance for our own good, even when our people are struggling with record high costs of living, it smacks of paternalism,” said Assoc Prof Lim.
Adding that he could not support the amended motion, he noted that the amendments suggest that Singapore “strike off the importance of review”.
On the other side of the house, PAP MPs rose in support of the amended motion. Ms Jessica Tan (PAP-East Coast) noted that the global political instability and slow economic growth are likely to be prolonged.
“It is all the more important that the measures that we take are sustainable,” she added.
“The key is finding that balance with spending for today to support the current needs of Singaporeans, to improve their quality of life, while doing it in a manner that will allow us to continue to invest for future needs and growth.”
It is tempting to suggest increasing the NIRC and using the reserves for Singaporeans today, said Mr Saktiandi Supaat (PAP-Toa Payoh GRC).
“But every extra S$1 used today means S$1 less for the future generation, or even S$1 less for us, which will be surviving in the future,” he added.
Singapore’s reserves policy also lends credence to medium- to long-term policy decisions, which adds stability to investors’ assessments, said Mr Saktiandi.
“As our spending needs continue to rise, we must make sure that our revenues grow at a comparable pace to maintain a sound and sustainable fiscal system.”
