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Transcript of Speech by Second Minister for Finance Indranee Rajah for the Substantive Motion on Public Finances at The Parliament, 7 February 2024

07 Feb 2024

1. Mr Deputy Speaker, I do not support the motion in its original form as moved by the NCMPs Mr Leong Mun Wai and Ms Hazel Poa. However, I support the amendments to the motion as proposed by Mr Liang Eng Hwa. Let me explain why. 

2. On the face of it, the PSP’s motion seems unobjectionable. After all, what is wrong with calling on the Government to review its current budget and reserve accumulation policies in order to help present-day Singaporeans with their financial burdens and improve their quality of life? However, when you look at it carefully, the motion implies various things which I cannot agree with. 

a. First, it suggests that the Government is over-accumulating surpluses and reserves at the expense of present-day Singaporeans, and is not helping them financially or doing anything to improve their quality of life;

b. Second, it suggests that we are unfairly prioritising future generations over the current generation.

3. Both are incorrect.

4. Further, in their speeches in support of the motion, PSP essentially suggests that the Government has excess fiscal resources which are not being spent on Singaporeans, and that there would be even more fiscal resources available if only we changed our reserves policies. We do not agree with that either.  

5. As such, I cannot support the original motion. However, I fully agree with the amended motion – the thrust of which calls on the Government to ensure that our budget and reserves accumulation policies always stay fiscally responsible and sustainable in order to provide for the current generation as well as future generations.

6. Associate Professor Jamus Lim made the point that he could not support the amended motion, because it precluded the possibility of a review. Actually, the amended motion does not do that. If you look at the wording, it says that this House calls on the Government to ensure its budget and reserves accumulation policies always stay fiscally responsible and sustainable in order to help, et cetera. Ensuring that something always stays fiscally responsible and sustainable does not preclude a review, because from time to time, you may have to make changes if necessary, in order to ensure that you stay fiscally responsible and sustainable. Just a small point on that.

Our Budget and Reserves Policies 

7. Mr Speaker, much has been said in this debate about our budget and reserves policies, but let us be clear on what they are, so that we are not speaking at cross-purposes.

Budget Policies

8. Our budget policies are founded on the following principles:

a. We aim to live within our means, and commit to running a balanced budget over each term of Government;

b. We are prudent in our spending while doing our best to ensure that we meet the needs of our people;

c. We generate revenues to cover recurrent expenditures so as to avoid burdening Singaporeans with debt; and 

d. We have a fair and progressive system of taxes and transfers. 

Reserves Policies

9. Our reserves are a key strategic asset for Singapore and Singaporeans of all generations.

10. Our reserves policies are also founded on a set of core principles: 

a. Our reserves help current and future generations of Singaporeans.

b. We save our reserves, invest them, and use the investment returns sustainably.

c. If needed, we will tap on our reserves to help Singapore and Singaporeans get through exceptional crises.

11. The investment returns from our reserves provide a steady stream of income to supplement the Government’s budget, and give us greater fiscal means than we would otherwise have.

a. The Net Investment Returns Contribution (NIRC), accounts for about 20 cents out of every one dollar, or one-fifth, of Government revenues.

b. Present-day Singaporeans benefit directly from the reserves every year via the NIRC.

c. And also during crises such as the COVID-19 pandemic.

12. At the same time, we do not spend all of our investment returns. We save half of them to cater to future needs – for both the current and future generations.

13. Our fiscal and reserves approaches are thus underpinned by the principles of: fairness, prudence, and sustainability.

What we have achieved with our Budget and Reserves Policies

14. While Singapore will always be a work in progress, and we are always striving to do better, the Government’s fiscal and reserves policies have served Singaporeans well.
15. Far from what the PSP suggests, our fiscal and reserves policies have enabled us not just to help Singaporeans across generations to improve their lives, but also to achieve remarkable things together, and to chart our future with confidence.

16. To appreciate the full extent of how our policies have helped us, one must consider our context – a country with no natural resources, a population size a mere fraction of others, competing with economies far larger, more developed, and much more endowed than ourselves.

17. Despite the odds, we have been able to help Singaporeans cope with challenges, and seize opportunities. 

18. Consider the following:

19. Covid-19: The Covid-19 pandemic was a crisis of a generation. But because of our fiscal and reserves policies, we were able to deploy about $80 billion to fight the pandemic, half of which were drawn from the Past Reserves. This allowed us to save lives, save jobs, and emerge from the pandemic stronger. We did that for this current generation. We were able to provide critical support to households, such as through the Care and Support Package and the COVID-19 Support Grant. We could gain timely access to vaccines to keep our population protected and safe; and save Singaporean workers’ jobs and keep businesses afloat, such as through the Jobs Support Scheme.

20. Unlike many other countries, we did not have to borrow to fund our crisis spending. Some of those countries will take decades to repay their pandemic debt.

21. Economy: We kept our economy going through the pandemic, and we are enhancing our attractiveness as a global business hub, even as we weather global economic and geopolitical headwinds.

22. Cost of Living: We are also mindful that people are experiencing inflation, cost-of-living issues, and cost pressures. To help households cope with the cost of living, inflation, and the GST increase, the Government:

a. Enhanced the Assurance Package from $6 billion to over $10 billion; and

b. Continues to provide additional support, such as through the enhanced GST Voucher – Cash, CDC vouchers, and U-Save and S&CC rebates. 

23. Education: Our policies in education have enabled us to provide our children with a good education and a strong foundation for the future.

a. Currently, by the time a Singaporean child turns 16, he or she would have received around $200,000 in education and pre-school subsidies.

b. Our students, have consistently performed well in the Programme for International Student Assessment (PISA), emerging as top performers in Reading, Mathematics, and Science in the latest 2022 cycle.

24. Jobs: We have created good jobs for Singaporeans and kept unemployment low. We have helped workers to continuously upskill and reskill, by providing SkillsFuture credits and course fee subsidies. We have supported those who have lost jobs to find new ones. 

a. Because of our efforts, household real incomes per member for the lower- and middle-income have grown by more than 3% per annum over the past decade.

25. Lower-Wage Workers: We have been uplifting our lower-wage workers through the Progressive Wage Model, covering over 90% of lower-wage workers, and Workfare, which supplements wages by up to 25%.

26. Human Capital: We emerged top among 157 countries in the 2020 World Bank Human Capital Index. This reflects our investments in our people to ensure that they are healthy and well-educated, and to keep our economy competitive. 

27. Housing:  Our home ownership rate is around 90%, one of the highest in the world.

a. We keep public housing affordable and accessible through generous housing subsidies and grants.

b. Most homebuyers use less than 25% of their monthly household income to service their HDB loan, and more than eight in ten first-timer new and resale flat buyers have been able to finance their monthly HDB loan instalments using their CPF, with little to no cash outlay. 

28. Healthcare: Because of our fiscal policies, Singaporeans are assured of receiving good and affordable healthcare. 

a. All Singaporeans receive means-tested subsidies at public healthcare institutions, covering up to 80%of treatment costs.

b. They are also covered by MediShield Life for large hospitalisation bills and costly outpatient treatments. The Government also provides subsidies to keep MediShield Life premiums affordable. For those who face financial difficulties, MediFund provides yet another safety net.

c. Singapore has one of the highest healthy life expectancies in the world. We have been featured on Netflix as one of six healthy "Blue Zones", regions with a high concentration of healthy centenarians.

29. Retirement Adequacy: As Singaporeans live longer, we ensure our retirement support system provides them with peace of mind in their golden years. 

a. For those who had low incomes in their working years, we supplement their retirement income through the Silver Support Scheme.

b. The Majulah Package will provide a further boost for our seniors and young seniors.

30. Income Inequality: Our fiscal policies have allowed us to put in place a system of support to provide more for those who have less.

a. Our Gini co-efficient has improved. Our income inequality has come down over the past fifteen years, especially after we take into account Government transfers and taxes. 

31. Well-Being of the Middle-Income: Then, the middle income. We remain focused on the well-being of the broad middle of society, who receive more in benefits than the taxes they pay. 

a. For every dollar of tax a middle-income Singaporean household pays, they receive around $2 in benefits, higher than in other countries like the UK and Finland.

b. The lower-income in Singapore receive more, at $4 in benefits for every dollar they pay. 

c. Even the upper middle-income group (those in the 61st to 80th percentile) receives about the same or slightly more in benefits compared to what they pay in taxes. They may not get as much in direct cash benefits compared to lower-income groups, but they too enjoy access to affordable housing, healthcare, and world-class education that I have mentioned earlier. 

32. Value for Money: We try to deliver as much value as possible for every taxpayer dollar.

a. Singapore’s Government expenditure remains among the lowest across advanced economies, at 18% of GDP compared to the OECD average of over 40%. 

b. But even as we keep public expenditures lean, Singapore produces social and economic outcomes that have been better than most. So being the lowest in terms of spending does not mean that we are not doing good things with it. We are actually getting value for money for Singaporeans.

33. Low Tax Burden. Our progressive tax policies have also enabled us to keep the tax burden low.

a. 40% of workers do not pay Personal Income Tax. The effective tax burden for middle-income households is around 10% of household income. This is significantly lower than in advanced economies like the US, UK, and Finland, where it can exceed 20% or even 30%. 

34. Transportation and Infrastructure: Our fiscal policies ensure that we can continuously upgrade our infrastructure, such as our new MRT lines.

a. We set aside funds whenever we can afford to, and we borrow through the Significant Infrastructure Government Loan Act (SINGA).

b. This way, we spread the costs of such projects fairly and sustainably across current and future Singaporeans, all of whom will benefit from these projects. 

35. Climate Change: Our fiscal policies put us on a good footing to tackle climate change, an especially existential threat for Singapore.

a. Our carbon tax revenues will be used to support decarbonisation efforts and our transition to a green economy, and cushion the impact on businesses and households.

b. We have also set up the Coastal and Flood Protection Fund (CFPF) to set aside moneys when fiscal conditions permit.

36. We have achieved so much with so little, in large part because of our fiscal policies. We are able to meet our needs yet live within our means; we are able to plan ahead and meet the future with confidence; and we have the assurance that we have the wherewithal to navigate an uncertain world. 

37. This is why I support the amended motion. In  our budget and reserves policies, anchored on key principles of fairness, prudence, and sustainability, that will enable us to secure our prospects and build a better future together.

38. Now, let me move on to the points that the opposition members have made. 

a. I mentioned earlier that PSP’s position is that the Government has excess fiscal resources that are not being spent on Singaporeans. They say that, over and above this, we would have even more fiscal resources available, if only we changed our reserves policies, especially by spending more from investment returns or land sales, and that aspect is also WP’s position. 

b. Both call on the Government to reveal the full size of the reserves, ostensibly to facilitate greater accountability and debate.

39. Let us address these in turn.

Budget Policies

40. PSP’s belief that we have plenty of excess fiscal space is misconceived. This was addressed by DPM Wong in his Round-Up Speech in Budget 2023, but let me summarise briefly: 

41. COVID-19 Expenditure: The amount of COVID-19 expenditures funded from current revenues instead of Past Reserves does not reflect excess resources. 

a. I am making this point because that was something raised in the Budget 2023 debate by Mr Leong Mun Wai. The COVID-19 expenditure does not reflect excess resources; it reflects diverted resources. 

b. Projects that were planned and budgeted for had to be deferred during COVID and the resources that would otherwise have been used for them were reallocated to the urgent task of fighting COVID-19. Now that we are out of the pandemic, these projects are back on track and we will need to spend on them. 

42. Funds:  Mr Leong Mun Wai talked about funds just now, and his assumption is that we are parking away these moneys, and somehow there is all these excess money that is not being used. More importantly, his suggestion is that they are not being used on today’s, present-day, Singaporeans, or the present-day generation. That is not so.

a. Contrary to PSP’s assertion, the moneys that we put in funds are not just for the far unknown future, but are resources set aside to meet specific funding commitments that are already benefitting Singaporeans today.  

b. For example, over $2 billion is disbursed annually from the GST Voucher Fund for the GSTV Scheme, which is a permanent scheme, to help lower- and middle-income Singaporean households defray their GST expenses. This goes to Singaporeans of today, not just unborn Singaporeans of the future.

c. Other examples include the funds for the Pioneer Generation and the Merdeka Generation Packages, both of which are drawn down regularly today for Singaporeans of today to support them. 

d. We also have Funds set up to meet longer-term commitments, especially where the expenditure is large and lumpy. For example, the Changi Airport Development Fund funds the development of Terminal 5 and other aviation facilities. These commitments benefit all Singaporeans by securing our economic competitiveness and creating jobs for current and future generations.

e. By setting these moneys aside when we are able to do so, we smoothen out lumpy spending and give Singaporeans assurance that support will be available in the future, and they will not have to scramble to find the money only when it is needed. 

This is prudent, thoughtful, and responsible fiscal policy – not evidence of excess fiscal resources. 

43. Then Mr Leong suggests that we have excess resources from the NIRC, but that, too, is not the case. Revenues, including NIRC, are pooled together to fund our annual spending needs. I have just explained the Government’s approach to setting aside resources in Funds, which are being drawn down today, and not just in the future. So, there is no excess NIRC, as PSP alleges. 

44. Mr Leong suggests that we are somehow over-accumulating funds or spending more than necessary. 

45. But, it is important to look at our fiscal projections as a percentage of GDP, and not in nominal terms, as Mr Leong has done when comparing our current and pre-Covid expenditure. 

46. Government expenditure was 18% of GDP in 2019, and as DPM Wong has explained previously, we expect it to reach potentially over 20% by 2030. It does not reflect imprudent spending, but rather medium-term trends, including the need to spend more on healthcare due to our ageing population.

47. From time to time, we may have revenue upsides but that should not be taken as evidence of excess funds. The right way to assess our fiscal position is not based on year-to-year changes, but based on the broader medium-term trends. 

a. As set out in the MOF Occasional Paper on Medium-Term Fiscal Projections published last year, Government expenditure is now at 18% of GDP and we expect it to reach over 20% by 2030, as I mentioned just now.

48. On the revenue side, without the GST increase and other revenue measures, we would not be able to fund this projected increase in expenditure. The GST increase and other moves will help close the gap – assuming we maintain spending at 20% of GDP, which may not be an easy task given the increasing calls on the Government to do more. 

49. The reality is that we are in a tight fiscal position over the medium term. Hence, our budget policies must continue to be prudent and sustainable. We will continue to monitor our revenue and expenditure trends closely, and adjust our fiscal strategies to meet our collective aspirations in a way that is fair to both current and future generations of Singaporeans.

Reserves Policies

50. Let me now turn to the contention that we have even more resources if we changed our reserves policy. Essentially, the opposition’s arguments boil down to two things.

a. First, that land sales proceeds should be treated as revenue, that is common to both PSP and WP; and

b. Second, that we should waive the land cost for HDB flats as per PSP’s so-called Affordable Housing Scheme (AHS). 

51. Let me deal with the first point first, on treating land sales proceeds as revenue. On this, I recall the Leader of the Opposition referred several times to land sales increasing the size of our reserves. He said even if 100 per cent of the NIRC could be spent, which the Workers’ Party has not called for, the reserves will continue to grow steadily, since the proceeds from the sale of land, which hit billions of dollars a year, added to the reserves. And he said our principal reserves continue to grow with the proceeds from land sales. The Leader of the Opposition is mistaken. Land sales do not constitute revenue. We have debated the issue of treating land sales proceeds as revenue many times in this House. Suffice to say:

a. Selling land does not generate new wealth. When we sell land, we are merely converting the land from a physical asset to a financial asset.

b. Earlier, Associate Professor Jamus Lim acknowledged that land – a physical asset – forms part of the reserves. What happens when you sell a piece of land? 

c. When you sell the land for $100 million, you get back $100 million. Are you richer? You are not, because the land that was worth $100 million has left your hands. But what you have gotten is $100 million. Your reserves are neutral; your position is still $100 million. It is not new money; it is not new revenue; it is not new wealth. I had explained this in quite some detail in a very long parliamentary answer to a parliamentary question back in Nov 2022. We can check the Hansard. I encourage members to read that answer to the parliamentary question, which explains it in some detail. 

d. This is the fundamental problem with many of the suggestions that have been put forward by the opposition, because the assumption there is that when you sell a piece of land, you are somehow getting wealthier. You are not getting wealthier. You are just getting cash in exchange for land. 

e. So, what happens to the cash? The proceeds accrue to the reserves to preserve its value.

f. The Government invests the proceeds with the rest of the reserves. That is what happens. Then of course it comes back every year into the Budget. The income on those reserves that are invested, come back into the Budget via the NIRC.

52. There are pitfalls if we use land sales proceeds for direct expenditure.

a. First, land sales are affected by property cycles, which are volatile and difficult to predict. 

b. This would mean Government revenues would fluctuate with the market, creating uncertainty and making it more difficult for the Government to plan for the long term.

c. Second, when a government relies on land sales to fund spending, it could develop a vested interest in keeping land prices high to maximise revenues. 

d. This will ultimately hurt the economy and harm Singaporeans.

53. By accruing the land sales proceeds to the reserves, investing them, and using 50 per cent of the investment returns through the NIRC, we are in fact spending from our land sale proceeds, but indirectly rather than directly.

54. This provides a stable and sustainable stream of revenue and avoids the pitfalls of direct expenditure of the land sales proceeds.

55. It appears that PSP acknowledges these pitfalls. Because to get around them, PSP has suggested a variation – that we spend land sales proceeds by treating them as revenue divided over the period of the lease. In other words, when we sell a 99-year parcel of land, we can spend about 1 percent of the proceeds each year.

56. Actually, if you think about it, this proposal is not so different from the Government’s current approach. Both are anchored on the idea that you do not use up all the proceeds at once. Because for the Government, we say that you take $100 million, you put it in reserves, you invest it. The PSP’s solution is you keep 1 per cent, you invest 99 per cent. You have that 1 per cent there. But the difference is this:

57. Under the Government’s approach, instead of spending that dollar of land sales proceeds directly, we invest it, and spend half of the investment returns generated.

58. In the long run, that dollar will grow with time, and we will be able to spend more than just that dollar of land sales proceeds we originally received.

59. Under the PSP’s proposal, we may see a small increase in revenues in the near term. But because we are ploughing back less into the reserves, we would also have a reduction of the reserves. Put very simply, under PSP’s proposal, you have $1. Under PAP’s approach, the $1 goes back, and you get more than a dollar. That is the difference. 

60. If you took PSP’s approach, there would be overtime less to invest. Less reserves, means less to invest, and overtime, less returns and a lower NIRC. In the long-run, PSP’s proposal would result in a reduction in revenue, compared with the current approach. And here, I just want to stop to explain something, because we hear Mr Leong Mun Wai explain this over and over again. And I think it is time we examine the statement. 

61. Mr Leong, you are ready? Mr Leong says all the time, “We are saving, we are accumulating, this is our money, you are not giving back to Singaporeans, and the time has come when you are over accumulating and saving too much.” What is missing from that assertion is the recognition that when we take it and put it in the reserves, and it is invested by GIC, 50% of the projected income comes back every year into the annual Budget. When it comes back into the annual Budget, it forms about 20% of our annual Budget. Together with all the other revenue, it enables us to do all the things I talked about earlier – healthcare, education, transport, subsidies, CDC Vouchers, all of that. 

62. So, the impression that has been consistently put forward is as though the Government is taking the money and squirrelling it away, and not sharing it with Singaporeans. That is not correct. 

63. The Government is taking it, investing it, and making sure that Singaporeans are getting it back every year, through the NIRC, with earnings on the income. I just want everybody in this chamber to remember that. You really need to remember this. 

64. When we say that we are investing in the reserves, we are not keeping this money away from Singaporeans. We are growing it and using it for Singaporeans. 

Providing land for free/ low cost for public housing

65. Let me move on now to the next proposal from PSP, which is providing land, free, under their affordable housing scheme. We have debated the issue of public housing land cost exhaustively in this House last year and it is unnecessary for me to go into this at length.

66. The crux is that State land forms part of our Past Reserves. These reserves are held for the benefit of all Singaporeans. It is not part of the assets that the Government can use as it wishes. When HDB requires land to develop flats, the land has to be taken out of the Past Reserves. HDB has to purchase the land by paying fair market value for the land, and the money goes into the Past Reserves.

67. If we give it away for less or for free, as PSP proposes, our reserves will shrink each time land is used for public housing and we will be short-changing Singaporeans. 

68. We have explained numerous times that HDB does not price new flats to recover the cost of land and construction. Instead, they are priced below market value using significant market discounts to ensure that they are affordable to Singaporeans across different income percentiles. 

a. We can see this from resale transactions, where many flat-owners sell their flats on the open market at prices higher than those of comparable BTO flats. 

b. HDB also provides housing grants to help specific groups of buyers with their first flat purchase. 

c. With market discounts and housing grants, most first-timer households use less than a quarter of their monthly income to service their HDB loans. This means that they can service their monthly mortgage payments with CPF, and little to no cash outlay.

69. As such, there is no need for the Government to give land to HDB for free to ensure housing affordability.  Another view by some members like Ms Hazel Poa is that increasing land cost is driving up HDB prices, which requires more market discounts and grants to keep flats affordable; which places unnecessary burden on tax payers

70. As explained at length by Minister Desmond last year, the spike in resale prices was a phenomenon trigger by COVID-19 disruptions. 

a. The best way to tackle this is to ensure sufficient housing supply. In this regard, the Government has been ramping up BTO supply, including having more projects with shorter waiting times.

b. Meanwhile, because it will take time for the supply to come on stream, the Government has made moves to prioritise BTO supply for those with more urgent housing needs. This includes giving greater priority to families with children and young married couples, who are buying their first home. The additional ballot will significantly increase their chances of securing a BTO flat, especially one in a non-mature estate.

71. In addition, together with the roll out of the new HDB flat classification framework from the second half of this year, housing prices will better reflect the locational attributes of BTO projects. Potential homebuyers can look forward to more affordable BTO flats. 

72. Before I leave the subject of land, just wanted to come back to another point that Mr Leong alludes to quite frequently. He keeps saying that the reserves represents land that was acquired with the blood, sweat and tears of Singaporeans. Just two points on this: 

73. There was land that we have in our reserves, which is not acquired land. There is land, which is state land, before any land had to be acquired. That is one point. Acquired land is not the only land that is in our reserves. 

74. But the more important point is this. In the early years, when we had to acquire land, the country, and therefore the Government, did not have very much money. Under the regime of the Land Acquisition Act at that time, the formula at which we acquired land was necessarily not quite the same as pure commercial market value. But that land that was acquired through the sacrifices of Singaporeans was taken, developed for national purposes and used for the benefit of Singaporeans, whether it was through JTC industrial land, building MRTs or other public publics, and for HDB flats. That land, when it was taken, at a time when the Government was not having the same revenue streams as today, was taken for public purposes, given back and ultimately used for the benefit of the public, which is why the proposal to treat land in our reserves as if it has no value, to treat it as $0, does not honour the sacrifices of the group that gave up their land under the Land Acquisition Act. Because their land, which did go into the Reserves, means something to them, means something to us when we built on it, and you should not treat it as though it is worth nothing. It has a value, we should recognise it, and we should reflect it. 

75. Next, let me move on to the transparency on the size of our reserves. Both PSP and WP has called on us to disclose the full size of our reserves.

76. We have disclosed many aspects of our reserves management policies on our Government websites, in Parliament and via media platforms. The size of the assets managed by MAS and Temasek are also publicly available every year; only those managed by GIC are not.

77. We have explained many times in this House why we do not disclose the full size of our Reserves.

a. Our Reserves are our strategic asset against crises and emergency scenarios.

b. Such scenarios could threaten our economy and livelihoods, or even our existence as a nation.

c. Just as our defence forces do not reveal the full extent of our weaponry and military capabilities, it is not in Singapore’s national interest to disclose the full size of our reserves.

78. I noticed today, that the argument has moved on a little bit, and it was said that “you need to disclose the full size of the reserves and have full transparency so that we can have a conversation and a debate. The thing is, just because something is fully transparent does not mean that all the relevant things will necessarily be highlighted. 

79. Earlier on today, the Leader of the Opposition referred to an IPS survey. If I could have that distributed, I believe a copy had been given. 

80. The Leader of the Opposition in his speech said “The IPS working paper referred to earlier in my speech revealed relatively low levels of trust in journalists and the media on the  topic of Reserves policy. For this house’s information, Opposition politicians scored higher in this regard. Nothing wrong with that statement, perfectly correct. But the Leader of the Opposition did not highlight the other statement, which was just on top of the statement that he referred to, which is that the highest trust level was accorded to the PAP Government. 

81. There is a chart which shows that the PAP Government was put at seven. Then it was scholars, then family and friends, then fellow citizens, followed by members of the Opposition. The IPS survey is fully transparent. But just because it is fully transparent, it does not mean that everything will necessarily be highlighted, or a conversation taken on a particular trajectory. I have no quarrel with the Leader of the Opposition for highlighting his particular statement, but I just want to say that full transparency does not actually always mean the full picture, depending on what is done with the information. 

82. Next, I move on to PSP’s contention that because our Total Fertility Rate is declining, we will need less resources in the future.

83. Don’t forget, while we may have fewer babies born, we have a population who is living longer, and yet will have fewer children to support them. 

84. A smaller workforce will have to support a larger, ageing population.  

85. We will need the additional resources to provide Singaporeans with greater healthcare and ageing support in their silver years. 

86. On CPF, Ms Hazel Poa suggested that the Government is paying out less interest than it should. Mr Louis Chua has also suggested to directly pass through GIC’s returns to CPF members. 

87. In 2024, then DPM Tharman explained in Parliament in great length how we set our CPF interest rates and manage CPF proceeds. Our CPF rates are fair, they are pegged to return on investments of comparable risk and duration in the market. The rates are risk free for members, Regardless of the interest rate environment, or the returns that the Government actually earns in a particular year, we continue to pay the CPF rates that we have committed. Over the past 20 years of low interest rates, the Government has continued to provide members with 2.5% minimum interest rates on OA monies, and since 2008, a 4% minimum interest on SMRA monies, extra 1% interest on the first $60k of combined CPF balances for all members, an additional 1% interest on the first $30k of combined CPF balances for members aged 55 and above. 

88. While the Government expects to earn returns over the long-term that will be able to cover CPF interest rates, there is no assurance that GIC’s returns will exceed CPF interest rates in the shorter-term, let alone every year. There have been years where GIC’s returns fall below CPF interest rates, but we do not cut CPF interest rates. The Government is able to maintain CPF interest rates regardless of the interest rate environment, or the financial performance for our investment entities only because we have a buffer of net assets. In effect, where GIC has earned returns higher than that of CPF interest rates, it is used to cover for the many years of low interest rates, and when GIC earns returns below CPF rates. This ensures that Singaporeans do not experience fluctuating CPF rates and will continue to receive stable rates to grow CPF balances for retirement adequacy. 

89. Rate of Growth of the Reserves. On the question on the rate of growth of the reserves, Mr Leong has suggested that the Government is growing our reserves faster than necessary. If we were truly over-accumulating our reserves, the NIRC will be growing much faster rate than GDP, but do remember that our economy is growing and our population has higher needs. In fact, the NIRC has kept pace with our economy. Over the past five years, NIRC has remained stable at about 3.5% of GDP, and we expect this trend to continue.

90. As DPM Wong has explained previously, at the current pace of accumulation, reserves growth will not greatly outpace economic growth.
So in truth, we are not at all over-accumulating our reserves.

91. If we slow down the pace of saving, the value of our reserves will diminish over time.

92. The fact of the matter is that our spending needs are growing, and these need to be funded. We do not have a lot of fiscal space, contrary to what the PSP suggests. 

93. The WP has acknowledged that there is a medium-term funding gap, and that taxes need to be raised.

a. They opposed all the previous GST increases, but recently changed their position and said they accept the GST at 7%. 

b. We are able to enjoy today’s sound and stable fiscal position because the Government introduced the GST in 1994, and revised the rate prudently in good time.  This GST increase is needed too, in light of the spending trends I have shared.  We have to spend more in several key areas, and we will need the revenues very soon. 

c. The WP has suggested a slew of tax measures in lieu of the latest GST increase, including to introduce a tax on net wealth above $10 million and further raise property taxes.

94. Effectively, they seek to impose more taxes on the wealthy, rather than raise the GST as a broad-based consumption tax.  Their ostensible objection to the GST increase was that it would negatively impact the lower-income groups.  

95. The fact is the higher-income groups are already paying more in taxes. That is how we have designed our overall fiscal system – to be fair and progressive.  Remember, the GST increase was done together with enhancements to the permanent GST Vouchers. This ensures that the well-to-do pay more GST, and the lower-income are impacted the least.  In other words, the wealthy who consume more will also contribute their fair share of taxes.  

96. The Opposition’s other suggestion is to spend more from the Reserves – for example, tweak the NIRC formula or fund land purchases from the reserves rather than the current Budget. But is this really the best course of action for Singapore? Given significant uncertainties in the current geopolitical situation, this would not be wise. 

97. As such we must use our reserves wisely. Today, we preserve our principle and strike a balance between our current and future needs by spending 50% of the investment returns, while putting the remaining 50% back into the reserves to grow it for the future. We believe this to be fair to current and future generation of Singaporeans. We should not be too quick to change this. I think WP alluded to that fact that they are not saying to touch the principle, that is fair enough. And they had suggested 60-40, DPM Wong had addressed this before, he had said ‘never say never’, but not for now. Not for now, because we need to make sure that we have enough ballast to keep us going.  

98. We have faced four major crises between 1997 and 2020 – the Asian Financial Crisis, the SARS outbreak, Global Financial Crisis, and COVID-19 pandemic. In a more uncertain and volatile world, we cannot expect less.

99. In a crisis, we can draw on our reserves, but having such solid reserves in and of itself also means we have a rock to anchor ourselves on in turbulent times. Our reserves give us confidence, and gives others confidence in us. In times crisis, we become the harbour in the storm for many investors. 

100. We must and will continue to do right by Singaporeans, for Singaporeans. Doing right by Singaporeans is not just about meeting the needs of Singaporeans today; it is about looking after our children, grandchildren, and generations of tomorrow.

101. That is the approach our pioneers took with regard to the reserves, the result of which is that we all benefit today. As stewards of our reserves, we have the obligation to manage it judiciously, make refinements where needed, so that it will continue to serve its purpose for Singaporeans today and in years to come.

102. Mr. Speaker, I support the amended motion. Thank you.