In his speech to the PAP Conference on 27th November, PM Lee said that Singaporeans could expect a good Budget because government revenues had been better than expected.
The Reform Party is not surprised by this. The real question is why Singaporeans have not benefited for so many years from excessive government surpluses all these years.
The way the Budget is presented makes it difficult to discover what the true state of government finances are. The Finance Minister first reports what is called the primary balance which is the difference between operating revenue (the amount raised in taxes and user fees) on the one hand and the sum of operating expenditures and development expenditures on the other.
The Minister then adjusts this balance for special transfers (the main item is GST credits) including top-ups to endowments and trust funds. This results in what is called the basic balance before the net investment returns contribution is added in.
The net investment returns contribution is up to half of Temasek and GIC’s income in any year. Again we are not told the exact percentage and any capital gains (or losses) on their portfolios are not included. After adding this in Minister Tharman forecast a deficit of about 1.1% of GDP for 2010.
The question is whether this is in any sense a meaningful indicator of the government’s fiscal position. Since the primary balance does not include interest income, investment income and capital grants yet includes development expenditure, the Reform Party contends that it clearly is not.
The Yearbook of Statistics 2010 shows that the general government surplus (which is more comprehensive than the government surplus since it includes extra-budgetary amounts) was $18 billion in 2005 and 2006, $35 billion in 2007 and $22 billion in 2008. In 2009 the government deficit (the general government figure was not available) was $4 billion but according to the Monthly Digest of Statistics for November 2010 this has been reversed this year and up to October the surplus was about $16 billion for the first six months. If one could crudely extrapolate from that then one might expect the total surplus for the year to be around $32 billion. To arrive at a rough estimate as to what this means for the ordinary Singaporean, if I divide the surplus by the number of Singapore citizens (roughly 3.2 million as of June 2010) then that gives a figure of $10,000 which could theoretically be distributed to every Singaporean man, woman and child without reducing the Government’s net asset position. And do not forget that is not just a one-off windfall. A similar sum could have been distributed in every year except 2009.
In fact the government’s statement of assets and liabilities as at 31st March 2009 shows a net asset position of over $300 billion (if it is assumed that the entire Government Securities Fund is a liability to bond-holders). And that would appear to be before two important elements:
- The equity in our Sovereign Wealth Funds (Temasek and GIC)
- The value of the land to which the government holds the freehold which comprises about 80% of Singapore’s area.
Singaporeans have learnt to expect that in an election year there will be some exceptional transfer payments and tax credits (which will be subsequently more than clawed back through increases But what my analysis highlights is just how generous the Government can afford to be. Or to put it another way how much higher both consumption and investment could have been if the government had aimed to balance its budget rather than run surpluses close to 10% (and sometimes considerably more than 10%) of GDP in most years . Furthermore this surplus does not take account of:
- The income earned by our investments in Temasek and GIC let alone any capital gain on these investments; and
- Any change in the value of the government’s holdings of land. Land prices have risen strongly in recent years yet that is not reflected in the government’s net asset position.
The Reform Party would like to know why there is such a lack of transparency in the budgetary process and it is so difficult to get information as to the government’s true fiscal position.
Furthermore we want to know why the PAP always talks about the danger of bankrupting Singapore and no money being available to fund investment in our people when in fact the government’s net asset position is so inefficiently large. The Reform Party is a liberal free market party and not a socialist party. We believe that these assets can be put to much more productive use if they are in the hand of the private sector. In addition we believe better returns can be earned by investing more in our people than can be earned in low-yielding foreign government securities. Therefore we want to see:
- Cuts in taxes and fees across the board especially on the lower-income segments
- Universal health insurance from a reform of the current Medisave, Medishield and Medifund system
- Universal free and inclusive education up to secondary level
- More investment in reforming the education system and making it relevant to the broad mass of our population in a 21st century knowledge-based economy
- More generous income support for working low-income families with children
- Control of CPF returned to the individual and right to withdraw employee contributions at 55 restored
- Basic old age pension to be funded through CPF but to be paid to everyone who has worked for minimum number of years even if they do not have minimum sum in CPF account.
- Privatization of Temasek and GIC and distribution of shares to Singapore citizens
We will have no difficulty in answering the question we are frequently asked, “How do you intend to pay for this?”
So the Reform Party calls upon Singaporeans not to be deceived by the usual hand-outs that will come with next year’s Pre-Election Budget. Not even if these amount to several thousand dollars, as is entirely possible. You are being short-changed.
PM Lee said at his speech that “Provided Singaporeans support the Government and its plans, we can do it. We will make this one of the best countries in the world to live, work, bring up families and retire in.”
Don’t be fooled. Despite so many years of record surpluses, the PAP has failed to raise the living standards of the median Singaporean significantly since 1997. We can do better for you. Support the Reform Party and take your country back!