MOF Committee of Supply Debate 2020 by Second Minister of Finance Mr Lawrence Wong28 Feb 2020
A1. Mr Chairman, I thank the Members for their questions and comments for the Ministry of Finance.
A2. Members’ cuts cover three broad topics:
a. First, on fiscal sustainability and accountability;
b. Second, transformation of public service processes; and
c. Third, enhancing service delivery to be more business- and citizen-centric.
A3. I will speak on the first topic, as well as the questions on reserves and tax matters. Second Minister for Finance Indranee will cover the other two topics.
B. FISCAL SUSTAINABILITY AND ACCOUNTABILITY
B1. The COVID-19 virus outbreak and its economic fallout is a timely reminder of why it is critical to ensure long-term fiscal sustainability. We are a small country with no natural resources, exposed to global forces beyond our control. As Mr Liang Eng Hwa highlighted, our prudent fiscal strategy has provided us with the resources to respond promptly and decisively to crises, and also to continue investing for the future, and for the long term.
B2. Such resources did not come about overnight. They were built up over several decades. They were the result of prudent fiscal policies put in place by our pioneering leaders. So it is imperative that we continue to uphold this sound fiscal approach, in order to maintain our strong financial position. In particular, as Ms Foo Mee Har mentioned (and as Mr Cedric Foo said earlier in the Budget Debate), every generation must contribute its fair share, and not leave an undue burden for the next generation to bear. This is why we must continue to pay for recurrent needs with recurrent revenues, and that is also why every year when we prepare the budget, we do not come to Parliament to appropriate moneys just for the sake of spending every cent. Instead, we look at each project on its merit, we spend on what we deem to be cost-effective, and then if there are any savings, we set these aside for anticipated future needs, as we did this year for climate change.
B3. Upholding such financial prudence and discipline is a reflection of our commitment to Singaporeans, not just the present generation of Singaporeans. As DPM Heng said earlier in the Budget Round-up Speech, it is also a reflection of our commitment to future generations of Singaporeans.
B4. A key part of our prudent fiscal system is to have a resilient and diverse revenue base, as well as to have effective and value-for-money public spending. I will elaborate on each of these.
Sustaining our Revenues
B5. As Ms Foo highlighted, a healthy and growing economy is crucial to sustaining our revenues. This is why the Government invests upstream to build capabilities of Singaporeans and to provide maximum opportunities for Singaporeans to excel. This is how we can continue to enlarge and grow our economic pie.
B6. Mr Lee Yi Shyan asked whether Ministries play a role in industry development and contributing to economic growth. In fact, this is the case. While the Ministry of Trade and Industry (MTI) is the lead agency for the economy, various government agencies do take on sectoral lead roles. For example, the Monetary Authority of Singapore (MAS) oversees the financial services sector; the Infocomm Media Development Authority (IMDA) looks at industry development for the IT sector; and the Building and Construction Authority (BCA) takes care of the built environment and so on. All in all, we have 23 Industry Transformation Maps (ITMs), and we have set aside budgets for the respective lead agencies to support the implementation of the ITMs including technology adoption, R&D and industry development. All of this work is coordinated under the Future Economy Council.
B7. To Ms Foo’s question on the progress of our investments into economic transformation, we are starting to see these efforts bear fruit. In the last three years, overall productivity growth, as measured by real value-added per actual hour worked, rose to 2.6% per year, up from the 2.2% per year in the preceding three-year period. Real median wages have also gone up.
B8. Ms Foo also asked about the impact of our R&D investments. The National Research Foundation (NRF) recently completed its mid-term review of the Research, Innovation and Enterprise (RIE) 2020 Plan. RIE2020 is on track to meeting its outcomes, such as in supporting industry growth and catalysing greater innovative activities in the private sector. As at end-March 2019, our RIE investments have supported the creation of more than 5,500 industry jobs. Business Expenditure in R&D has grown steadily since the start of RIE2015, from $4.5 billion in 2011 to $5.6 billion in 2018 – an increase of about 25%. In less than two years, RIE2020 has also exceeded the target of supporting more than 250 successful startups.
B9. So we are seeing positive results. But there’s always room to do better. All government agencies are fully aware that they must continue to achieve maximum value from the public funds they are entrusted with, and to keep transforming our industries and sustain economic growth.
Prudent, Efficient and Effective Spending
B10. Just as we want to grow our revenues, it is equally important to ensure our spending is prudent, efficient and cost-effective. Ms Foo asked about the budget mechanisms in place to manage expenditure growth, and to incentivise public officers to achieve savings.
B11. Our Block Budget Framework sets a spending cap for Ministries. In 2017 and 2018, we reduced both the spending cap and the annual growth rate of the block budgets, to further manage expenditure growth. Within this Block Budget Framework, if Ministries have any savings, they can roll over part of the savings from the operating budget to the next financial year.
Robust Evaluation of Infrastructure and ICT Projects
B12. For big-ticket items such as infrastructure and ICT projects, which Mr Saktiandi Supaat and Mr Liang spoke about, MOF applies additional scrutiny to evaluate such projects for their worthiness and cost-effectiveness, before embarking on them. Large infrastructure projects, like the coastal protection infrastructure that Mr Saktiandi mentioned, will be reviewed by a panel of technical experts from the private and public sector, and academia, before they are given the go-ahead. Over the past five years, these processes have led to design improvements and generated savings of about $3.5 billion for infrastructure projects.
B13. Take the Cross Island Line (CRL), for example. The depot for CRL at Changi East was initially planned to be underground, to optimise above-ground land use. After working with the Land Transport Authority (LTA) and agencies to evaluate the costs and benefits of this approach, agencies found a way to site the depot above ground with reduced engineering risks and at lower cost.
B14. Similarly, through the review processes for ICT projects, we have been able to achieve cost savings of about 6% or $900 million over the past 5 years.
B15. To further strengthen our scrutiny over ICT spending, we will be inviting industry experts to form an ICT advisory panel to benefit from their private sector perspectives in the evaluation of major government ICT projects.
Joint Programme Budgets
B16. For issues that may not fall neatly within a specific agency’s domain or area of responsibility, we agree with Ms Foo and Mr Liang that agencies do need to collaborate to avoid duplication of efforts and costs. To facilitate this, MOF has set up joint programme budgets for cross-cutting areas, like ICT and Smart Systems, Cybersecurity, and Research, Innovation and Enterprise.
a. For example, the Cybersecurity programme budget was put in place by MOF, Cyber Security Agency of Singapore (CSA) and Smart Nation and Digital Government Office (SNDGO), to improve coordination, discipline and prioritisation for the build-up of whole-of-government cybersecurity programmes. This partnership helps the Government to make more informed and robust resourcing decisions as a whole.
B17. MOF will continue to identify areas that warrant such multi-agency approach and set aside joint programme budgets where necessary, to get agencies to work together for more effective outcomes, rather than to do so in their individual agency silos.
Value-For-Money Culture and Accountability for Outcomes
B18. Ultimately, while budgeting mechanisms can facilitate discipline in the way we use public monies, the best way to ensure prudence and effectiveness is to instil a value-for-money (VFM) mindset in every public officer, as Ms Foo and Mr Liang rightly highlighted. This is a continual work in progress, but we have seen improvements over the years.
B19. Take the Ministry of Transport (MOT) as an example. It sets outcome-based Key Performance Indicators (KPIs) such as percentage of commuters’ journeys completed within 45 minutes, so there are clear outcomes for its spending. MOT also conducts VFM workshops for its officers to share ideas and best practices. It has its very own Ministry’s VFM Awards for projects that generate significant dollar savings and benefits for citizens.
B20. One LTA project that recently won the MOT VFM Distinguished Award is the Smart and Energy-Efficient Street Lighting System, which provides higher energy efficiency, as well as reduced manpower and time to detect and rectify defects. This led to cost savings of about $4 million every year.
B21. A key part of ensuring every dollar has been well spent is by tracking and evaluating the effectiveness of our spending. We do so by setting KPIs upfront during policy design, so that spending is tied to the desired outcomes. Then we review the policies regularly to ensure that they are on track to fulfil the outcomes.
a. Take the KidSTART programme as an example. The Early Childhood Development Agency (ECDA) started this as a pilot in 2016 targeting to benefit 1,000 children, with carefully designed indicators and a clear evaluation plan. Since then, the team has been
monitoring outcomes such as child developmental milestones, preschool attendance and quality of parent-child interactions, to assess the programme’s effectiveness.
b. Based on the preliminary results and positive feedback, the Government and MOF had the confidence to expand KidSTART to benefit another 5,000 children over the next three years. Thereafter, we take stock of how to expand KidSTART further. This example illustrates how we scale up progressively, rely on data evidence and learning points to improve the programme, and then constantly review the effectiveness of public spending.
B22. Mr Liang earlier shared about his work as a member of the Public Accounts Committee (PAC). Let me thank him and the Public Accounts Committee for their hard work in scrutinising public expenditure.
a. Addressing lapses that Mr Liang and Ms Foo mentioned is a continuing effort that requires balance between controls and efficiency. Like any large organisation, we recognise that it will not be possible to achieve zero lapses given the high volume of
transactions across the Government. Nevertheless, where lapses are found, our agencies will take immediate steps to address them and strengthen their controls to minimise recurrence. This may include relooking at our policies, practices, and systems,
as well as stepping up training of Public Officers.
b. I assure Ms Foo that the Government adopts a zero tolerance approach to fraud and corruption. Those who commit wrongdoing will face the full measure of the law. Where appropriate, disciplinary actions are also brought against officers responsible for lapses.
B23. MOF will spare no effort, as we work with agencies to ensure that the Government remains responsible, open and accountable in our use of public funds. We will continue to strengthen our system of checks and balances, and instil discipline in every
officer to make sound spending decisions.
C. DISCLOSURE OF INFORMATION BY SOVEREIGN WEALTH FUNDS
C1. Mr Leon Perera had asked about succession plans and disclosure practices of Sovereign Wealth Funds, particularly of GIC and Temasek.
C2. The Government has explained its position clearly on these issues. Both GIC and Temasek are commercially-run entities, and the Government maintains an arms-length relationship with them. The Boards of these entities are ultimately responsible for their respective operations, performances, as well as succession for leadership.
C3. For these two entities, the focus and the mandate that we have put on them is to generate long-term financial returns for the benefit of Singaporeans. The two entities put out a lot of information every year in their annual reports, highlighting not just their performance, but also extensive information and commentary on their investment approach and their outlook. In fact, over the years, GIC and Temasek have progressively put out a lot more information than they used to. We will continue to encourage the two entities to review and examine what additional information they would like to put out in their annual reports.
C4. From the Government’s point of view, our key consideration is this - whatever disclosure requirements that the two entities put out should be part of an overall system which enables the two entities to maximise their abilities to secure long-term returns for the benefit of Singaporeans. That is our overall objective.
C5. We want to have a system that allows our two entities to succeed in achieving their mandate, and we have to be very mindful of what kind of disclosure requirements we place on them, and be careful of not leading them to pursue indicators that can lead to undesirable behaviours.
C6. For example, if we were to insist, as some have suggested before, on publishing annual indicators of performance, some of these entities may then be driven towards short-term performance. That will not be in our interest. Because these are entities that are looking at achieving long-term financial returns.
C7. If we are insistent on them disclosing indicators of fees and expenses to a great level of detail, it may lead these entities towards minimising expenses, potentially eroding capabilities or diminishing their talent pool, which would also not be in our interest.
C8. So we are quite careful and deliberate in thinking about what sort of system we want to put in place, and ultimately it is a system that enhances the performance of the two entities in securing long-term returns. That is why if you look at what is published, it is the long-term returns net of all expenses incurred, and the information is published for both GIC and Temasek in their annual reports. Ultimately, we want to preserve the competitive advantage of our two investment entities vis-à-vis other market players and we want to maximise their ability to secure long-term returns for the benefit of Singaporeans.
D. TAX-RELATED MATTERS
D1. Lastly, let me touch on tax-related matters. Mr Louis Ng and Mr Png Eng Huat suggested extending existing tax reliefs to unwed parents and single fathers respectively.
D2. Let me explain the Government’s considerations here. Where there are government benefits that support the child’s growth and development, we will extend them regardless of their parents’ marital status. That is why all Singaporean children today receive over $180,000 of education subsidies by the time they turn 16, at least $6,000 in their Child Development Account (CDA) Grants, and $4,000 in MediSave Grant for Newborns.
D3. In this way we support all parents, including unwed parents, to give their children education opportunities, good healthcare, and a conducive social environment, so that they can realise their fullest potential in life.
D4. For the Parenthood Tax Rebate and Working Mother’s Child Relief, these were intended to support parenthood within marriage, and for married mothers to continue working after childbirth. Likewise, for the Foreign Maid Levy Relief, this was specifically granted to encourage married women to continue working. There were specific objectives tied to these schemes.
D5. Having said that, our schemes are never cast in stone. We continue to review and re-calibrate them from time to time. Members will recall that we have reviewed and extended support to unwed parents in recent years, including the CDA benefits, as well as the full 16 weeks of Government-paid Maternity Leave.
D6. So these things will continue to progress and evolve. Besides looking at specific tax reliefs and comparing the benefits for one group versus another, it is important to take a step back and look at the broader picture. Ultimately, we all share common objectives – we want to give every child a good start in life, we want to provide support for all parents, and we want to build strong families in Singapore. We have different schemes and policy tools to achieve these multiple objectives, and we will continue to fine-tune and review our schemes to achieve the optimal balance.
E1. Mr Chairman, MOF is committed to ensuring that our spending is effective and sustainable over the long term, and we will do so in partnership with the community.
 CY2015 to CY2019