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76. Now, let me talk about one very important issue
which MPs have raised, and that is, funding this
budget. Several MPs, including Mr Yeo Guat Kwang,
Mr Chew Heng Ching, have asked if this Budget’s
stance diverges from our principle of fiscal
prudence and our longer-term sustainability.
And Mr Ong Kian Min had asked if we should have
been more tight-fisted and withheld some of the
generous cash give-aways.
77. It is good that Members are looking beyond
this Budget to these issues of long-term growth
and fiscal sustainability. But let me assure
Members that this Budget will not strain our
long-term fiscal position.
78. First, the size of the Progress Package, $2.6
billion, is not large compared to that of the
New Singapore Shares which was $2.5 billion and
Economic Restructuring Shares which was $2.7
billion. So it does not imply unprecedented generosity
as mentioned by Dr Amy Khor. However, because
we have become more targeted in our approach,
older, lower-income households can expect to
receive more this time and the impact on them
will be more significant.
79. Second, our Progress Package is not a permanent
programme. It is once-off. We are not promising
this every year or every five years or every
so many years. It is once-off, needed this time
because we are restructuring, because the economy
has turned good, and yet we know that there are
some segments of the population needing help.
So, a Progress Package is justified.
80. Also, our transfers to the Endowment Funds,
which Professor Ivan Png mentioned, are accounted
for conservatively. Professor Png suggested that
the Overall Budget Position should be calculated
based on actual expenditures rather than the
total transfers to these funds. This is a plausible
accounting treatment, but we have chosen a more
conservative approach in line with our principle
of fiscal prudence.
81. Going forward, our fiscal position is sustainable.
In this term, it has been tighter than we expected
and tighter than before. Several reasons - because
there was a slow economy in 2002 and 2003 and
we have had two major packages. First, we provided
the ERS (to offset the GST increase) which was
$2.7 billion. Later on, we deferred part of the
GST increase, staggering it, first 3% to 4%,
then 4% to 5% - the deferral cost $600 million-$700
million. It is big money. And now, we are having
this Progress Package.
82. Going forward, we are not likely to have the
same combination of events. Nevertheless, the
position will be fairly tight and we must continue
to be vigilant and focused.
83. There seems to be some confusion about how
we will fund the Special Transfers of $3.59 billion
for FY2006, judging from the media and analysts’ reports
on the Budget, and also from what has been said
in this House.
84. As I stated in the Budget Statement, we have
some funds which accrued to the current government
when it took office in 2001, as well as some
capital receipts from our statutory boards during
the term of this government. We do not reflect
these capital receipts in the overall budget
position because despite what Mr Steve Chia said,
they are irregular, lumpy and uncertain sources
of funds. Over the last ten years, these capital
receipts have fluctuated between $30 million
at the lowest to a few billion dollars at the
highest. If we had included them, it would have
overstated the amount of regular revenue we have
on a year-to-year basis with which to fund our
regular expenditures. But these capital receipts
remain available to the Government to spend within
its term, without drawing on past reserves. Taking
them together with the funds from the changeover
of year 2001, we have enough to pay for the Special
Transfers without drawing on past reserves.
85. Let me just go through some of the numbers.
86. We started off the current term in 2001 with
$2.51 billion of funds accruing to the incoming
government. The amount was computed because it
was a changeover year, and it was computed in
accordance with the Apportionment Rules between
the outgoing and the incoming government as laid
out in the White Paper on the protection of reserves.
87. The Government also received $2.45 billion
over FY2002 till FY2005 in capital receipts from
statutory boards which were returning capital
in excess of their needs.
88. On the other hand, if you total up the budget
surpluses and deficits between FY2002 and FY2006,
including $3.59 billion of Special Transfers
in 2006, the net cumulative Overall Budget Deficit
is $4.23 billion.
89. So, just taking the $2.51 billion that the
current government got in FY2001 plus the $2.45
billion in capital receipts from statutory boards
- that adds up to $4.96 billion - we can comfortably
fund the $4.23 billion net cumulative Overall
Budget Deficit from FY2002 to FY2006.
90. So, we have enough funds with some left over.
But let us not exaggerate. TODAY reported on
the 24th of February that the Government is able
to draw on capital receipts from statutory boards
in the current term and such receipts raked in
$13.42 billion between the fiscal years 2002
and 2005. Mr Steve Chia yesterday further inflated
this figure to $19 billion.
91. Steve Chia says that he is misled and that
the people are misled by the Government. But
actually it is Mr Steve Chia who is misleading
all of us because these numbers are all incorrect.
We do not have $13.42 billion of capital receipts
to draw on as reported by TODAY, let alone $19
billion as claimed by Steve Chia.
92. Let me explain. TODAY's main error is to treat
capital receipts from the sale of Government
land as money we can spend. These land sales
add up to more $10 billion, but they are locked
up, as past reserves, and cannot be touched because
this is not new money. It is not earned, it is
not capital gains, it is just transformation
of a piece of land into cash, transformation
of one asset into the other. The land has been
locked up, so the cash proceeds are also locked
up. This was TODAY's mistake. Steve Chia also
made this mistake but I believe he must have
made some other mistakes in order to reach such
a huge number.
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