The RP’s Response to Budget 2011

My Fellow Singaporeans,

Don’t you get the feeling that this is a government that lurches from day to day and has no long term plan?  That there is no one today who is the equal of Dr. Goh Keng Swee who was responsible for the master plan that put Singapore on the road to export-led growth in the 1960s.

This is a shameless electioneering budget laced with one-off payments to the electorate under the guise of not wanting to create entitlements. There is no pretence at putting in place long-term solutions to the problems faced by working Singaporeans.

But even amidst all the relentless hype about the one-time giveaways one salient fact stands out.  That is the smoke and mirrors over the Budget figures.  The Honourable Minister always manages to just balance the Budget or run a small deficit. However the balance is calculated by looking at operating revenue minus operating and development expenditure. Then there is a contribution from Temasek and GIC which may be much less than half their total profit. But interest and investment income on our enormous reserves is not added in.

If we do this then the basic government surplus is about $15 billion and not close to zero as claimed. This may not tell the whole story because it may not include the income from Temasek and GIC or the profits from land sales.

Surpluses of this size as a proportion of GDP have been the rule for over twenty years now. The Reform Party is not advocating giving back to the people the whole of the surplus for this year. However we say that we do need to have a rational debate as a nation as to what is the prudent level of reserves and what are our long-term needs.

The government’s attitude has always been that we are too childlike to make rational decisions and therefore the sweet jar must be hidden away on a high shelf out of our reach.

Much is made of the fact that the Budget is supposed to help Singaporeans cope with inflation. However inflation on its own is not the problem. The problem is that our wages have barely kept pace with inflation.  And the culprit here is relentless population growth driven by this government’s liberal foreign worker policy.

The claimed increase in real median household incomes does not fit the experience of most Singaporeans.  Part of it may be explained by the big increase in the number of PRs and new citizens who are included in the figure for resident households. They are likely to have better paying jobs and fewer dependents. And there has been a rise in the number of working members per household. More of you are going out to work or working longer hours.

The Minister says as though it is something to be proud of that labour force participation rates have reached OECD levels!

But these countries have unemployment rates that are much higher than Singapore’s! Is he saying that actually real unemployment among Singaporeans is much higher than the official statistics suggest?

And what is their answer to rising inflation? How does it help to give away a series of one-off payments, much of which go into CPF, when prices are permanently higher and inflation appears to be accelerating?  And the idea of setting up a price council to monitor “excessive” price rises and shame the companies involved into backing down is laughable.

Such attempts at moral suasion were tried extensively in the 1960s and 1970s in the US and UK but never worked for very long. Have the PAP forgotten all the economics that Dr. Goh taught them?

The underlying causes of inflation come from our limited land resources and relentlessly rising population. This drives up rents and property prices.  Also from the near-monopolies the GLCs have in many utilities like public transport, power and telecoms. The RP has called for more competition and a sell-off of GLC companies. Where this is impossible we want a more effective competition regulator.

The government says it will control the influx of foreign workers. However what has gone unnoticed is the fact that the government’s figures don’t add up. To achieve their economic growth targets they will probably have to let the number of foreign workers rise substantially even if they meet their own productivity targets. Will they come clean and let us know whether they are still targeting a total population of 6.5 million by 2020, by which time native Singaporeans will be a minority?

And what is the point of further housing subsidies for low income families. Economic principles and historical experience show that it merely pushes up HDB prices by more than the subsidy. Of course the government benefits as the freehold owner from the rise in property prices.  But it is just pumping more air into the balloon. Rather than subsidies the government should be building more small units and releasing more land for building. The RP would allow more private sector competition and provide more rental flats to low income families.

We would also allow HDB owners to buy out their freehold and possibly restrict the remaining flats from being let to PRs and non-citizens.

So what else would the RP do differently?

Instead of one-off payments to Workfare we would introduce a minimum wage set initially at low levels but indexed to inflation and rising gradually over time.

We would extend Workfare and integrate it with Child Benefit (instead of the one-off Child Development Credit) which would provide income support and help with child care to low income working families with children.

We will abolish all school fees up to secondary level bringing us in line with other advanced nations that promise universal free education.

We will introduce a basic old age pension for those without CPF or other assets while safeguarding against abuse.

We will make a start on introducing a comprehensive and universal medical insurance scheme to replace the current patchwork of Medifund, Medisave and Medishield which have big gaps in coverage and end the situation where individuals can become destitute if they suffer a devastating illness.

We will continue to cut corporate and personal income tax rates where the fiscal situation allows. However we will audit and rationalise the vast and overlapping number of corporate help schemes and tax breaks in the interest of simplifying the tax code and getting better value for the taxpayer.

We will apply a similar analytical scrutiny to some of the personal income tax breaks like the Working Mothers Child Relief which principally benefit the already well-off.

We will continue to add to our reserves if it is prudent to do so.

At the same time we will engage in an open and transparent debate about the appropriate level of those reserves and whether better returns can be achieved by investing in our people.

My Fellow Singaporeans, in the past you have often seemed to be afflicted by short-term memory loss when the government dangles a few carrots in front of you! Don’t let this happen again. Remember this is your money and not the government’s. Vote wisely.


About kjeyaretnam

I'm a Singaporean economist who became an opposition activist. I blog to provide an alternative to the porkies that the Pinkies tell. It just so happens that my alternative is the truth. That's why I've never been sued in any civil or criminal court no matter how hard hitting my criticism. I'm quoted and interviewed and asked to speak across the world but largely censored in Singapore in an effort to silence my political opinions. The left hate me because they think I split their vote and because I eschew their outmoded economic models. Models that don't work. The Right and the Conservatives hate me because I'm a liberal. I'm not sure what the middle think of me. I don't think there are more than a handful of people in the middle, here in Singapore. I'm a Singaporean born and bred, dual heritage, my parents Singaporean established here before the State of Singapore was created. I'm not Eurasian. I read economics at Cambridge and could be broadly described as from the Keynesian school but I believe in interventions. I was formerly a successful hedge fund manager. After economics and politics my greatest interests are history, film and Makan. I run but I run so I can eat like a Singaporean.
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