(Delivered in Parliament on 5 April 2016)
Madam Speaker, this is the first Budget that allows the Government to tap on Temasek’s Net Investment Returns Contribution (NIRC) alongside the Monetary Authority of Singapore (MAS) and the Government of Singapore Investment Corporation (GIC), presenting the Government with a cumulative total of $14.7b. This is a substantial increase of about 48% from the NIRC of $9.9 billion at the Government’s disposal last year and has given this Government more leeway and flexibility to implement its plans, with a $3.4b surplus as well.
Madam Speaker, the focus of my speech is to persuade the Government to consider a deeper discussion of fiscal prudence and the trade-offs in determining our budget priorities. By doing so, we can have a richer discussion on the budget and my speech will seek to provide some suggestions on the contours of such a discussion.
A misplaced fear of welfare?
As with almost all budget announcements made over the last few years in particular, it is usually followed by a discussion in some quarters – especially in commentaries and forum pages – about whether the government is turning populist, or if welfare is taking root in Singapore, or a combination of similar themes. Very seldom are fears of welfare accompanied by a look at the overall fiscal state of affairs both in the short and long term.
The additional details in this Budget about the Silver Support package exemplify a recognition by the Government that there are many Singaporeans – more than 140,000 of them in fact – who are not adequately equipped for retirement and live precarious lives, perhaps not only physically, but more significantly, even mentally. The total expenditure for this year’s budget comes up to $73b.The $330m (0.4% of the total budget) expended on the Silver Support package will rise in the years to come because of our demographic profile. To put things in some perspective, the state collects $2.2b a year in gaming revenue. Our vulnerable elderly deserve to retire with dignity. That must be a central social objective of the Singapore system.
No discussion of financial prudence can escape the important behavioural question of ensuring our society retains a positive work ethic with permanent schemes like Silver Support and Workfare. However, this question should be posed with a sense of not just perspective, but also proportion, in view of the demographic transition in Singapore and the structural changes that come with economic transformation, both of which will become more apparent in the years to come.
More details to better understand sustainability
How can we better approach a discussion on the budget going forward?
Firstly, the evolution of technology and data analytics ought to make discussions on budget projection generate more light rather than heat. In the same way MINDEF human resource planners can project with sufficient granularity the number of men that will serve National Service in about 20 years time, and as a consequence determine force size and structure to a reasonable degree, a richer public debate on permanent schemes like Silver Support can take shape if we assess the sustainability of such schemes with a longer-term perspective in mind. This would help the public to better understand the overall costs and sustainability of such schemes rather than leave it conjecture.
For example, a more coherent and holistic public debate on the pros and cons of potentially expanding Workfare can also take place if the public is presented with tools to better understand how much such permanent initiatives are likely to cost years down the road. Many Singaporeans have in the past suggested tweaking Workfare to raise the cash component. Currently, a 50 year-old employee earning $1800 on Workfare gets an additional $9 in cash and $13 in CPF contributions every month, with the amount payable every quarter, subject to the number of months he or she remains employed.
However, an important consideration in the context of fiscal prudence, and understanding such permanent schemes better could be, for example, an exercise that compares raising the WIS pay-out amounts as compared against the initiative announced in this year’s budget which increases the income eligibility threshold. How many additional Singaporeans would benefit by this threshold rise and is there scope to further raise the payouts under WIS, and if so, what would be the specific impact on the budget, and would it be wise? Such enquiries will make the public better appreciate trade-offs and operationalise the meaning of fiscal prudence.
Companies and businesses on “Welfare”?
A second trend that often repeats itself prior to the budget debate are the wishes of specific industries or industry leaders who call for more reliefs or taxpayer support. What we do not see much of in the mainstream media is a debate about whether some companies have grown to expect the equivalence of constant assistance or “welfare” from the state, without the same scrutiny extended to permanent schemes for the needy or less well-off.
Like permanent schemes that help individual Singaporeans, a fuller public discussion on fiscal prudence should also extend to companies and industries, and enquire whether budget initiatives indeed achieve the policy outcomes they were intended for. For example, it would be helpful for the Government to set out how much the Productivity and Innovation Credit scheme (PIC) has actually improved national productivity numbers or even spurred innovation, even as this year’s budget heralds a reduction of PIC pay-outs going forward. This is relevant, as even the Government has acknowledged that some companies have used their PIC credits to buy equipment they do not need. Fiscal sustainability would also require accounting for the extent of such leakage and unintended consequences as well.
The lessons learnt from the shortcomings of the PIC scheme should be transferred to the budget’s announcement of the three-year $400m Automation Support Package, specifically with regard to grants, which assist in the rollout of new automation projects and investment allowances. This would ensure that technologies introduced actually improve productivity as envisaged.
Incentivising the Industry Transformation Programme
Moving forward, and specifically on the budget’s announcement of the $4.5 billion dollar Industry Transformation Programme with 20 sectors earmarked for development, it would be worthwhile to consider how companies and sectors that do the most to raise productivity, improve skills and innovation as well as promoting internationalization can benefit more from taxpayer dollars than those that do not. One way to effect this differentiation is to consider a higher cap on corporate income tax rebates than the current $20,000 cap for companies that record real productivity gains. For example, the cap can be progressively lowered or even removed completely for companies that do not meet the policy objectives of the scheme.
It would also be important for any exercise in fiscal prudence to distinguish and incentivize activities that actually create something tangible that have a real trickle-down effect as opposed to economic initiatives that just (I quote) “rotate around the high-finance microcosm enriching the 1% as they buy and sell existing assets to one another, bidding up their value, while failing to invest in research, products, jobs or innovation.” (unquote) – an apt descriptive which I read in a recent TIME magazine article that reviewed a new US primetime TV show, titled Billions.
Keeping Singaporeans at the core of the budget’s priorities
Madam Speaker, even as our businesses are incentivized to transform, they must keep Singaporeans at the centre of their efforts. To this end, the Industry Transformation Programme should identify and thereafter prejudice firms that are what the Ministry of Manpower calls double-weak firms – weak in having a Singaporean core and weak in their commitment to fair hiring practices and the development of Singaporeans. Likewise, these companies should be restricted from benefitting from corporate income tax rebates or tapping on the grants that go up on the business grants portal that is to be established in the fourth quarter of this year. An inclusive Singapore must be underwritten by Singapore-based companies that support the employment prospects of Singaporeans.
In conclusion Madam Speaker, a in recent book titled, Industries of the Future by Alec Ross, the former innovation adviser to Hilary Clinton portends a future where medical technology, robotics, coding, big data etc. will make many jobs redundant, amongst other interesting predictions. In this context, a deeper and more sophisticated public discussion on fiscal prudence, sustainability and accountability of budget expenditure in a more ambiguous future becomes more, not less urgent. It would also have the parallel effect of engendering a more inclusive citizenry that is rooted to Singapore’s long-term success.
Madam Speaker, I support the budget.