MOF Committee of Supply Debate 2021 by Second Minister for Finance Ms Indranee Rajah26 Feb 2021
A1. Thank you Mr Deputy Chairman. Let me just address the independent fiscal council. Also earlier on, during the debate on the Budget Statement, there were a few confused looks around the chamber, so I thought it would be helpful if I just explained what that was about. Mr Pritam Singh had suggested a parliamentary budget council. In his response, the Deputy Prime Minister had referred to that as having a $20 million budget being requested for it.
A2. The reason why that was referred to was because when MPs file cuts, they have to give an indication of what the cut is about so that the Ministry can prepare.
A3. And in this case, Associate Professor Jamus Lim had filed the gist that he proposed that MOF consider the formation of an independent fiscal council, the parliamentary budget council of Singapore seeded with an initial $20 million. And hence I sought clarification from the Leader of the Opposition, whether his parliamentary budget office was the same as the independent fiscal council and the Leader kindly confirmed that they were actually the same. He said, there's only one council that he's talking about. And we heard Associate Professor Jamus Lim just now, who has confirmed that what he’s asking is for a council, that is set up at a proposed cost of $20million. This is just so that everybody knows what everyone is speaking about.
B. INDEPENDENT FISCAL COUNCIL
B1. So let me address Associate Professor Jamus Lim’s cut. In assessing the value of such a proposal, the fundamental starting point must always be: why? What is the need to be addressed?
a. The Associate Professor ran us through various independent fiscal entities around the world. I will refer to them as Independent Fiscal Institutions (IFIs).
B2. It is important to first understand the context in which such institutions are established.
a. The setting up of IFIs around the world took place mainly in the aftermath of the Global Financial Crisis in 2008 and 2009, when government deficits and debts were high. There were some which were established beforehand. For example, in the US and the Netherlands. But primarily the largest bulk of them were established after the Global Financial Crisis. So more than half of the IFIs in the OECD today were established after the Global Financial Crisis and the main intent was to prevent future fiscal crises.
b. In those cases, fiscal rules had proved insufficient to ensure prudent management of the public finances before the crisis. IFIs were set up to safeguard fiscal discipline, eradicate unreliable budgeting, and rebuild public trust in policymakers’ capacity to manage public budgets prudently and transparently.
B3. However, the context in Singapore is very different. The ills which led to the need for IFIs in other systems are not present in our system and we continue to keep a very strict eye on our fiscal prudence.
a. Markets have confidence in our system. We are among the small number of countries today that continue to enjoy a AAA credit rating.
b. The Government has been disciplined in keeping to our fiscal rules and safeguards. We have run balanced budgets in each term of Government barring major crises. The draw on Past Reserves for COVID-19 relief, which was a crisis situation, was done in accordance with our Reserves Protection Framework.
B4. We have put in place a strong system to scrutinise spending and debate budgetary matters, without incurring the costs of setting up additional fiscal monitoring institutions.
a. The Constitution requires us to run a balanced budget over each term of government, and any departure would require the approval of the President.
b. The Government is required under the Constitution to seek Parliament's approval for its expenditure and revenue during each year's Budget.
c. The annual Budget debate and Committee of Supply (COS) provide the opportunity for Members of Parliament to debate on and scrutinise Government policies and programmes.
d. Under the Constitution, the Government cannot draw on the reserves accumulated by past terms of Government without the approval of the Elected President.
e. There is a standing Parliamentary Select Committee, the Estimates Committee, which examines the Government's budget.
f. The Government's accounts are audited by the Auditor-General's Office. The AGO's findings are reported to the Public Accounts Committee (PAC), also another parliamentary committee, which can call on the relevant agencies to explain lapses or take corrective actions.
B5. More importantly, the Government has been upfront about the hard choices that we have to make on budgetary matters. For example, we have not shied away from highlighting the need to raise taxes to meet longer-term increase in healthcare and social spending needs.
B6. Robust, intellectually honest analysis is important, to foster more informed parliamentary debate. But ultimately, there is no substitute for having the political courage to make difficult budgetary choices.
a. Members of an independent fiscal council are not elected representatives in Parliament. Their role is to advise, but the responsibility of making difficult decisions ultimately lies with the elected Government. Alice Rivlin, the founding chair of the US Congressional Budget Office, said this very well. She said that IFIs “can play an important role in ensuring realistic and well-informed debate based on honest numbers, focusing attention on the consequences of action (or inaction), and identifying more or less sustainable solutions to budget dilemmas. They cannot instil political courage to make unpopular decisions. Political leaders have to do that for themselves.”
b. Setting up an independent fiscal council will not substitute for such courage. It will also not miraculously remove the structural drivers for higher healthcare and social expenditure, nor will it delay any painful changes.
c. Based on the experiences of other countries, did the setting up of IFIs solve their fiscal management issues? No, because ultimately, we cannot “outsource’ honest and upfront debate.
d. We should focus our time and energy on having robust, honest and constructive debates, deciding on the trade-offs and not delegate the responsibility to a third party.
B7. Forecasting is an inherently uncertain exercise, and independent institutions are not exempt from this uncertainty. So the OBR, or the Office of Budget Responsibility, in the UK has actually been criticised for overly optimistic forecasts and has had to downgrade its forecasts several times since it was set up.
B8. So we recognise that there will always be uncertainty in forecasting and fiscal planning, but we cannot wish away more fundamental drivers of expenditure, particularly the increase in public health expenditure, as our population ages.
C. SUPPORTING SOCIAL AND ENVIRONMENTAL OUTCOMES
C1. On supporting social and environmental outcomes, Mr Desmond Choo asked how we can drive environmental and social outcomes through our funding and corporate regulatory levers.
C2. MOF allocates public resources, and uses tax, charges and corporate regulatory levers, in order to achieve broader societal objectives, including social and environmental outcomes. These measures work alongside public education efforts.
C3. We have more than doubled our spending in the social and environmental sectors over the last decade we have achieved good social outcomes.
a. In the area of gender equality, Singapore reports our progress regularly to the United Nation Convention on the Elimination of All Forms of Discrimination against Women. We have done relatively well in areas such as higher education attainment, and are closing the gender gap in labour force participation rates and wages
b. However, more can be done. In some metrics, such as women in corporate leadership, we still lag behind the most progressive countries. Women still shoulder most of the caregiving burden.
C4. For environmental outcomes, we have one of the lowest carbon emissions per dollar of GDP in the world. Building on this, we are working towards peaking our emissions around 2030, and achieving our long-term net-zero aspirations as soon as viable. To do so, we are supporting businesses and households to become more energy-efficient, among other initiatives. Businesses can tap on EDB’s Resource Efficiency Grant for Energy or NEA’s Energy Efficiency Fund for funding support to adopt energy efficient technologies. However, there remain areas of improvement, such as our domestic recycling rate, which we hope to increase to 30% by 2030.
C5. On procurement, environmental sustainability requirements are already part of the consideration. For instance, agencies are required to buy energy-efficient appliances, and government buildings are required to achieve Green Mark standards. We will continue to enhance these requirements in support of GreenGov.SG.
C6. Mr Choo also suggested using the corporate regulatory lever.
C7. There are existing disclosure requirements for listed companies. For example:
a. The Code of Corporate Governance requires listed companies to disclose their board diversity policy in the company’s annual report.
b. The Singapore Exchange Listing Rules require listed companies to prepare annual sustainability reports.
C8. The Government is mindful that a unified international sustainability framework has yet to be agreed upon and is monitoring international developments closely. We will take these into account in studying when it would be feasible and timely to introduce sustainability reporting for non-listed companies.
C9. Besides the efforts made by the Government, businesses, organisations, and individuals must all play their part in changing their mindsets and accepting new societal norms. I encourage the various stakeholders to step up and help us achieve better environmental and social outcomes together.
D. SUPPORTING BUSINESSES, CITIZENS AND COMMUNITY
D1. Mr Liang Eng Hwa, Ms Foo Mee Har and Mr Saktiandi Supaat asked how MOF exercised agility and flexibility to flow assistance quickly to businesses and citizens.
D2. In response to COVID-19, our priority was to flow assistance to those affected as quickly as possible.
a. For example, the CPF Board and Inland Revenue Authority of Singapore (IRAS) enhanced their processes to speed up disbursements of the Jobs Support Scheme (JSS). This enabled the JSS payouts to be brought forward by three months, from July 2020 to April 2020. The JSS has helped to keep our unemployment rate in check.
D3. We also facilitated faster payment to government suppliers to ease their cashflows. During the pandemic, we went the extra mile to pay businesses as early as possible, rather than when the payment is due, which is typically 30 days from invoice date. As of end-Jan 2021, about 90% of invoices less than $5,000 were paid within an average of 12 days, benefitting about 4,500 businesses, comprising mostly SMEs.
D4. We exercised flexibility in applying regulations on businesses in view of the COVID-19 disruptions. The Accounting and Corporate Regulatory Authority (ACRA) extended the deadline to hold Annual General Meetings (AGMs) and file annual returns for companies. ACRA also worked closely with MAS, Singapore Exchange Regulation and other agencies to facilitate virtual AGMs. An estimated 120,000 eligible companies can benefit from this.
D5. Mr Saktiandi also asked about how we coped with the increased workload. The public service mobilised manpower resources within and across agencies to help our frontline operations. On top of that, we also hired temporary staff. For example, MSF hired more than 300 temporary staff in 2020, with many redeployed from the aviation sector, to ensure prompt assessing of the COVID-19 Support Grant.
D6. I agree with Ms Foo that it is important for the government to step up our collaborations and increase partnership to co-create solutions with businesses and community.
D7. Through a mix of traditional and digital media and engagement platforms, we reached out to 50% more Singaporeans during our recent budget engagements, as compared to the previous year. We received suggestions from close to 9,000 Singaporeans. Agencies considered the suggestions and refined our support scheme parameters to benefit more citizens and businesses. For example, we carefully evaluated feedback and included the coverage of qualifying shareholder-directors’ wages under the JSS since May 2020.
D8. We are stepping up our partnerships with businesses, community groups and citizens to create policy solutions together.
a. For example, the Technology Hub for Non-Profit Organisations (NPO) initiative, was an idea that originated from the NPO leaders to accelerate the digital transformation of the non-profit sector during COVID-19. Tote Board partnered MCCY, MSF and NCSS and worked with IT companies to put together this ‘one-stop shop’, providing a variety of shared-service IT manpower, programmes and digital solutions to NPOs.
E. ENHANCING PUBLIC SERVICE CAPABILITIES
E1. Mr Liang, Mr Edward Chia and Ms Jessica Tan asked about MOF’s efforts in building up public sector capabilities and strengthening functional leadership.
E2. MOF is leading efforts to raise public sector capabilities in essential functions such as finance, procurement, grants management, shared services and internal audit. These functions play vital roles in ensuring the Government spends prudently, effectively and accountably. When these functions perform well, agencies can focus on their core missions of helping businesses, citizens and the community. MOF has re-organised ourselves and formed dedicated offices to drive these efforts.
E3. To strengthen grants management, MOF established a new grants governance framework last year that sets out rules and guidance that cover all stages of a grant – from grant design, approval and disbursement, to monitoring and fraud detection. The Grants Governance Office was formed to drive its implementation and raise agencies’ capabilities to ensure proper financial governance.
E4. We are transforming government procurement to buy more smartly and effectively.
a. MOF set up the Government Procurement Function Office last year to drive efforts to transform and strengthen the government’s procurement function.
b. We are taking further steps to consolidate the procurement of facilities management services of government buildings. A central team with deeper expertise would manage these premises, instead of smaller decentralised teams. This provides the scale for service providers to adopt more innovative, less manpower intensive solutions to manage the facilities, and is in line with our industry transformation efforts.
c. As a start, we have consolidated the facilities management of The Treasury and Revenue House. This has resulted in estimated annual savings of $1.2 million. It also enabled the adoption of innovative technology solutions that facilitate workflow automation, data analytics, and access to real-time data, which has improved service delivery at reduced costs.
E5. As Mr Chia pointed out, we need to develop public officers with deep sector technical knowledge. The Finance and Procurement Academy set up by MOF is working with agencies such as the Building and Construction Authority and GovTech to deepen technical know-how in specialised procurement areas such as contract management for construction and Infocomm Technology. We will also be facilitating attachment stints and exchange programmes with the private sector to enable our officers to stay abreast of the latest professional and industry developments.
E6. In response to Ms Foo’s and Ms Tan’s questions, as we strengthen the public sector capabilities and processes, we are also adopting more pervasive digitalisation in our processes. These efforts also help spur digital transformation in the private sector.
E7. For instance, MOF and GovTech are partnering businesses to co-create a solution which facilitates public officers to make smaller value purchases on commercial digital platforms.
a. We are currently piloting this with Eezee and Shopee, and will be onboarding more e-commerce platforms progressively in the coming months. This solution not only helps us save processing time, it also incentivises vendors to digitalise and bring their businesses online.
E8. Ms Foo also asked if local businesses could re-use government developed capabilities. Minister Vivian Balakrishnan earlier mentioned various collaborations between Government and the private sector, like SGFinDex, to deliver solutions. GovTech has also launched the Singapore Government Developer Portal in December 2020. This one-stop resource site enables tech developers to discover the latest government IT solutions to build on and integrate into their applications.
F1. Mr Chairman, the Public Service continues to enhance its capabilities, and is committed to working with the community and businesses to position Singapore to grow and thrive for the long term. Let us work in partnership so that Singapore can emerge stronger together.